-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
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ESTATE DESIGNER
issued by
Security Life of Denver Insurance Company and its Security Life Separate Account L1
The Policy |
Fund Managers |
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Funds managed by the following investment managers are available through the policy: |
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Premium Payments |
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The Policy Value |
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Death Benefit Proceeds |
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Are paid if your policy is in force when the second of the insured people dies. |
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Are calculated under your choice of options: |
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This prospectus describes what you should know before purchasing the Estate Designer variable universal life insurance policy. Please read it carefully and keep it for future reference. |
Neither the Securities and Exchange Commission ("SEC") nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. |
The policy described in this prospectus is not a deposit with, obligation of or guaranteed or endorsed by any bank, nor is it insured or guaranteed by the FDIC, the Federal Reserve Board or any other government agency. |
The date of this prospectus is April 29, 2005 |
TABLE OF CONTENTS |
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Page |
Page |
POLICY SUMMARY |
3 |
TAX CONSIDERATIONS |
50 |
The Policy's Features and Benefits |
3 |
Tax Status of the Company |
50 |
Factors You Should Consider Before Purchasing |
Tax Status of the Policy |
50 |
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a Policy |
6 |
Diversification and Investor Control |
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Fees and Charges |
8 |
Requirements |
51 |
THE COMPANY, THE FIXED ACCOUNT AND |
Tax Treatment of Policy Death Benefits |
51 |
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THE VARIABLE ACCOUNT |
18 |
Distributions Other than Death Benefits |
51 |
Security Life of Denver Insurance Company |
18 |
Other Tax Matters |
53 |
The Investment Options |
18 |
ADDITIONAL INFORMATION |
56 |
DETAILED INFORMATION ABOUT THE |
General Policy Provisions |
56 |
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POLICY |
20 |
Distribution of the Policies |
61 |
Purchasing a Policy |
21 |
Trading - Industry Developments |
64 |
Fees and Charges |
25 |
Legal Proceedings |
64 |
Death Benefits |
30 |
Financial Statements |
64 |
Additional Insurance Benefits |
35 |
APPENDIX A |
A-1 |
Policy Value |
39 |
APPENDIX B |
B-1 |
Special Features and Benefits |
41 |
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Termination of Coverage |
48 |
MORE INFORMATION IS AVAILABLE |
Back |
Cover |
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TERMS TO UNDERSTAND |
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The following is a list of some of the key defined terms and the page number on which each is defined: |
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Term |
Page Where Defined |
Term |
Page Where Defined |
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Age |
56 |
Net Policy Value |
4 |
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Fixed Account |
18 |
Policy Date |
21 |
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Fixed Account Value |
39 |
Policy Value |
39 |
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Joint Equivalent Age |
56 |
Segment or Coverage Segment |
31 |
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Loan Account |
40 |
Surrender Value |
5 |
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Loan Account Value |
40 |
Valuation Date |
39 |
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Monthly Processing Date |
26 |
Variable Account |
19 |
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Net Premium |
22 |
Variable Account Value |
39 |
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"Security Life," "we," "us," "our" and the "company" refer to Security Life of Denver Insurance Company. "You" and "your" refer to the policy owner. The owner is the individual, entity, partnership, representative or party who may exercise all rights over the policy and receive the policy benefits during the lifetime of the insured people. |
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State Variations - State variations are covered in a special policy form used in that state. This prospectus provides a general description of the policy. Your actual policy and any riders are the controlling documents. If you would like to review a copy of the policy and riders, contact our customer service center or your agent/registered representative. |
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You may contact us about the policy at our: |
Customer Service Center |
2 - Estate Designer |
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This summary highlights the features and benefits of the policy, the risks that you should consider before purchasing a policy and the fees and charges associated with the policy and its benefits. More detailed information is included in the other sections of this prospectus which should be read carefully before you purchase the policy. |
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Premium Payments See Premium Payments, page 22. |
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Free Look Period See Free Look Period, page 24. |
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Death Benefits See Death Benefits, page 30. |
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Estate Designer - 3 |
No-Lapse Guarantee |
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Temporary Insurance See Temporary Insurance, page 24. |
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Rider Benefits See Additional Insurance Benefits, page 35. |
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Investment Options See The Investment Options, page 18. |
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Transfers
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Asset Allocation Programs
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4 - Estate Designer |
Loans See Loans, page 41. |
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Partial Withdrawals See Partial Withdrawals, page 45. |
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Surrenders See Surrender, page 48. |
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Reinstatement See Reinstatement, page 49. |
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Estate Designer - 5 |
The decision to purchase a policy should be discussed with your agent/registered representative. Make sure you understand the policy's investment options, its other features and benefits, its risks and the fees and charges you will incur. Consider, among others, the following matters. |
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Life Insurance Coverage |
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Fees and Charges See Fees and Charges, page 25. |
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Lapse
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Investment Risk See The Variable Account, page 19. |
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Exchanges See Purchasing a Policy, page 21. |
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6 - Estate Designer |
Taxation See TAX CONSIDERATIONS, page 50. |
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Sales Compensation |
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Other Products |
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Estate Designer - 7 |
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The following tables describe the fees and charges you will pay when buying, owning and surrendering the policy. |
Transaction Fees and Charges The following table describes the fees and charges deducted at the time you buy the policy, make a partial withdrawal or request an excess illustration. See Transaction Fees and Charges, page 25. |
Charge |
When Deducted |
Amount Deducted |
Tax Charges |
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Sales Charge |
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Partial Withdrawal Fee |
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Excess Illustration Fee |
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8 - Estate Designer |
Periodic Fees and Charges. The following table describes the fees and charges deducted each day or each month on the monthly processing date, not including fund fees and expenses. See Periodic Fees and Charges, page 26. |
Charge |
When Deducted |
Amount Deducted |
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Cost of Insurance Charge 1 |
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Mortality and Expense Risk Charge 2 |
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Policy Charge |
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Administrative Charge |
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Loan Interest Charge |
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1 |
The minimum and maximum rates shown are for insured people in the standard risk class. The cost of insurance rates shown are for the first policy year. The rates have been rounded to the nearest penny. Consequently, the actual rates are either more or less than these rounded rates. The rates that apply to you depend on the amount of your base insurance coverage and the insured people's ages, genders, policy duration and risk classes and generally increase each year after the first segment year. Different cost of insurance rates will apply to each segment of base insurance coverage. A segment or coverage segment is a block of insurance coverage. The rates for the representative insured people listed above may be more or less than you will pay, and you should contact your agent/registered representative for information about the rates that apply to you. The guaranteed maximum cost of insurance rates for an insured person in the substandard risk class is $83.33 per $1,000 of base insurance coverage. |
2 |
The daily mortality and expense risk charge rate has been rounded to the nearest one thousandth of one percent. See Mortality and Expense Risk Charge, page 26 for the daily rate without rounding. |
Estate Designer - 9 |
Optional Rider Fees and Charges. The following table describes the charges deducted if you elect any of the optional rider benefits. See Optional Rider Fees and Charges, page 28. |
Rider |
When Deducted |
Amount Deducted |
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Adjustable Term Insurance Rider 3 |
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Single Life Term Insurance Rider 4 |
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3 |
The rates shown are for the first policy year and have been rounded to the nearest penny. Consequently, the actual rates are either more or less than these rounded rates. The rates for this rider depend on the insured people's ages, genders, risk classes and policy duration and generally increase each year after the first policy year. The rates for the representative insured people listed above may be more or less than you will pay, and you should contact your agent/registered representative for information about the rates that apply to you. |
4 |
The rates shown are for the first policy year and have been rounded to the nearest penny. Consequently, the actual rates are either more or less than these rounded rates. The rates for this rider depend on the insured person's age, gender, risk class and policy duration and generally increase each year after the first policy year. The rates for the representative insured person listed above may be more or less than you will pay, and you should contact your agent/registered representative for information about the rates that apply to you. |
10 - Estate Designer |
Fund Fees and Expenses. The following table shows the minimum and maximum fund fees and expenses that you may pay during the time you own the policy. These may change from year to year. You should review the Fund Expense Table, which begins on the following page, and fund prospectuses for details about the fees and charges specific to a particular fund. |
Annual Total Fund Expenses (expenses deducted from fund assets) |
Minimum |
Maximum |
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Total Gross Annual Fund Expenses 5 |
0.27% |
1.74% |
Total Net Annual Fund Expenses 5, 6 |
0.27% |
1.50% |
5 |
Total Annual Fund Expenses include management fees, distribution (12b-1) fees and other expenses. |
6 |
The Total Net Annual Fund Expense figures include management fees, distribution (12b-1) fees and other expenses and also take into account contractual arrangements that require reimbursement or waiver of certain fund fees and expenses until at least April 30, 2006. Out of all funds available through the policy, 24 have contractual arrangements to reimburse or waive certain fees and expenses through this period. Generally, these arrangements provide that fees and expenses will be reimbursed or waived above a certain levels for a specific period of time. See the Fund Expense Table which begins on page 12 for more detailed information about these contractual arrangements. The minimum and maximum Total Net Annual Fund Expenses shown take into account all of the available funds, not just those with contractual arrangements. |
Estate Designer - 11 |
Fund Expense Table.1 The following table shows the investment advisory fees and other expenses charged annually by each fund. Fund fees are one of the factors that impact the value of a fund share. To learn about additional factors, please see the fund prospectuses. See also Fund Fees and Expenses, page 28. The following figures are a percentage of the average net assets of each fund as of December 31, 2004. |
Fund Name |
Management Fees |
Distribution (12b-1) Fees |
Other Expenses |
Total Gross Annual Fund Expenses |
Fees and Expenses Waived or Reimbursed |
Total Net Annual Fund Expenses |
American Funds Insurance Series - Growth Fund - Class 2 |
0.35% |
0.25% |
0.01% |
0.61% |
-- |
0.61% |
American Funds Insurance Series - Growth-Income Fund - Class 2 |
0.29% |
0.25% |
0.02% |
0.56% |
-- |
0.56% |
American Funds Insurance Series - International Fund - Class 2 |
0.54% |
0.25% |
0.05% |
0.84% |
-- |
0.84% |
Fidelity® VIP Contrafund® Portfolio (Service Class) |
0.57% |
0.10% |
0.11% |
0.78% |
-- |
0.78% |
Fidelity® VIP Equity-Income Portfolio (Service Class) |
0.47% |
0.10% |
0.11% |
0.68% |
-- |
0.68% |
Fidelity®
VIP Growth Portfolio |
0.58% |
-- |
0.10% |
0.68% |
-- |
0.68% |
Fidelity® VIP High Income Portfolio (Service Class) |
0.58% |
0.10% |
0.13% |
0.81% |
-- |
0.81% |
Fidelity® VIP Investment Grade Bond Portfolio (Initial Class) |
0.43% |
-- |
0.13% |
0.56% |
-- |
0.56% |
ING AIM Mid Cap Growth Portfolio (Class S) 2, 3 |
0.66% |
-- |
0.26% |
0.92% |
-- |
0.92% |
ING Alliance Mid Cap Growth Portfolio (Class I) 4,5 |
0.77% |
-- |
0.01% |
0.78% |
-- |
0.78% |
ING Evergreen Health Sciences Portfolio (Class S) 2a |
0.75% |
-- |
0.25% |
1.00% |
-- |
1.00% |
ING Evergreen Omega Portfolio |
0.60% |
-- |
-- |
0.60% |
-- |
0.60% |
ING FMRSM Earnings Growth Portfolio (Class I) 6, 7 |
0.62% |
-- |
0.15% |
0.77% |
0.02% |
0.75% |
ING Global Resources Portfolio |
0.66% |
-- |
0.01% |
0.67% |
-- |
0.67% |
ING JPMorgan Small Cap Equity Portfolio (Class I) 4, 5, 9 |
0.90% |
-- |
-- |
0.90% |
0.03% |
0.87% |
ING JPMorgan Value Opportunities Portfolio (Class S) 10, 11 |
0.40% |
-- |
0.40% |
0.80% |
0.02% |
0.78% |
ING Julius Baer Foreign Portfolio |
0.96% |
-- |
-- |
0.96% |
-- |
0.96% |
ING Legg Mason Value Portfolio |
0.80% |
-- |
0.01% |
0.81% |
-- |
0.81% |
ING Limited Maturity Bond Portfolio (Class S) 2 |
0.28% |
-- |
0.25% |
0.53% |
-- |
0.53% |
ING Liquid Assets Portfolio |
0.27% |
-- |
0.02% |
0.29% |
-- |
0.29% |
ING Marsico Growth Portfolio |
0.77% |
-- |
0.01% |
0.78% |
-- |
0.78% |
ING Marsico International Opportunities Portfolio (Class S) 10, 11 |
0.54% |
-- |
0.42% |
0.96% |
0.03% |
0.93% |
ING Mercury Focus Value Portfolio (Class I) 8, 9 |
0.80% |
-- |
-- |
0.80% |
0.05% |
0.75% |
ING Mercury Large Cap Growth Portfolio (Class S) 2, 12 |
0.80% |
-- |
0.25% |
1.05% |
0.05% |
1.00% |
12 - Estate Designer |
Fund Name |
Management Fees |
Distribution (12b-1) Fees |
Other Expenses |
Total Gross Annual Fund Expenses |
Fees and Expenses Waived or Reimbursed |
Total Net Annual Fund Expenses |
ING MFS Mid Cap Growth Portfolio (Class I) 5, 8, 13 |
0.64% |
-- |
-- |
0.64% |
-- |
0.64% |
ING MFS Total Return Portfolio |
0.64% |
-- |
-- |
0.64% |
-- |
0.64% |
ING MFS Utilities Portfolio |
0.60% |
-- |
0.40% |
1.00% |
-- |
1.00% |
ING Oppenheimer Main Street Portfolio® (Class I) 5, 8 |
0.64% |
-- |
-- |
0.64% |
-- |
0.64% |
ING Pioneer Fund Portfolio |
0.75% |
-- |
0.26% |
1.01% |
-- |
1.01% |
ING Pioneer Mid Cap Value Portfolio (Class I) 15 |
0.75% |
-- |
0.01% |
0.76% |
-- |
0.76% |
ING Salomon Brothers Investors Portfolio (Class I) 8 |
0.74% |
-- |
0.01% |
0.75% |
-- |
0.75% |
ING Stock Index Portfolio |
0.27% |
-- |
-- |
0.27% |
-- |
0.27% |
ING T. Rowe Price Capital Appreciation Portfolio (Class I) 5, 8 |
0.66% |
-- |
0.01% |
0.67% |
-- |
0.67% |
ING T. Rowe Price Equity Income Portfolio (Class I) 5, 8 |
0.66% |
-- |
0.01% |
0.67% |
-- |
0.67% |
ING UBS U.S. Allocation Portfolio |
0.75% |
-- |
0.26% |
1.01% |
0.02% |
0.99% |
ING Van Kampen Equity Growth Portfolio (Class I) 8 |
0.65% |
-- |
-- |
0.65% |
-- |
0.65% |
ING Van Kampen Growth and Income Portfolio (Class S) 2, 3 |
0.66% |
-- |
0.26% |
0.92% |
-- |
0.92% |
ING American Century Large Company Value Portfolio (Initial Class) |
0.80% |
-- |
0.20% |
1.00% |
-- |
1.00% |
ING American Century Select Portfolio (Initial Class) 16 |
0.64% |
-- |
0.02% |
0.66% |
-- |
0.66% |
ING American Century Small Cap Value Portfolio (Initial Class) 17 |
1.00% |
-- |
0.40% |
1.40% |
0.10% |
1.30% |
ING Baron Small Cap Growth Portfolio (Initial Class) 17 |
0.85% |
-- |
0.40% |
1.25% |
0.05% |
1.20% |
ING Fundamental Research Portfolio (Initial Class) |
0.60% |
-- |
0.20% |
0.80% |
-- |
0.80% |
ING JPMorgan Mid Cap Value Portfolio (Initial Class) |
0.75% |
-- |
0.35% |
1.10% |
-- |
1.10% |
ING Oppenheimer Global Portfolio |
0.60% |
-- |
0.06% |
0.66% |
-- |
0.66% |
ING Oppenheimer Strategic Income Portfolio (Service Class) 18 |
0.50% |
-- |
0.29% |
0.79% |
0.04% |
0.75% |
ING PIMCO Total Return Portfolio (Initial Class) |
0.50% |
-- |
0.35% |
0.85% |
-- |
0.85% |
ING Salomon Brothers Aggressive Growth Portfolio (Initial Class) |
0.69% |
-- |
0.13% |
0.82% |
-- |
0.82% |
ING T. Rowe Price Diversified Mid Cap Growth Portfolio (Initial Class) 16 |
0.64% |
-- |
0.02% |
0.66% |
-- |
0.66% |
ING UBS U.S. Large Cap Equity Portfolio (Initial Class) |
0.70% |
-- |
0.15% |
0.85% |
-- |
0.85% |
ING Van Kampen Comstock Portfolio (Initial Class) 17 |
0.60% |
-- |
0.35% |
0.95% |
0.07% |
0.88% |
ING Van Kampen Equity and Income Portfolio (Initial Class) 16 |
0.55% |
-- |
0.02% |
0.57% |
-- |
0.57% |
ING VP Intermediate Bond Portfolio (Class I) 19 |
0.40% |
-- |
0.08% |
0.48% |
-- |
0.48% |
Estate Designer - 13 |
Fund Name |
Management Fees |
Distribution (12b-1) Fees |
Other Expenses |
Total Gross Annual Fund Expenses |
Fees and Expenses Waived or Reimbursed |
Total Net Annual Fund Expenses |
ING VP Strategic Allocation Balanced Portfolio (Class I) 19, 20 |
0.60% |
-- |
0.10% |
0.70% |
-- |
0.70% |
ING VP Strategic Allocation Growth Portfolio (Class I) 19, 20 |
0.60% |
-- |
0.10% |
0.70% |
-- |
0.70% |
ING VP Strategic Allocation Income Portfolio (Class I) 19, 20 |
0.60% |
-- |
0.10% |
0.70% |
0.05% |
0.65% |
ING VP Index Plus LargeCap Portfolio (Class I) 19, 20 |
0.35% |
-- |
0.09% |
0.44% |
-- |
0.44% |
ING VP Index Plus MidCap Portfolio (Class I) 19, 20 |
0.40% |
-- |
0.09% |
0.49% |
-- |
0.49% |
ING VP Index Plus SmallCap Portfolio (Class I) 19, 20 |
0.40% |
-- |
0.09% |
0.49% |
-- |
0.49% |
ING VP High Yield Bond Portfolio |
0.63% |
-- |
0.25% |
0.88% |
0.07% |
0.81% |
ING VP Real Estate Portfolio |
0.80% |
-- |
0.70% |
1.50% |
0.20% |
1.30% |
ING VP SmallCap Opportunities Portfolio (Class I) 21, 22 |
0.75% |
-- |
0.19% |
0.94% |
0.04% |
0.90% |
Neuberger Berman AMT Growth Portfolio (Class I) 25 |
0.85% |
-- |
0.11% |
0.96% |
-- |
0.96% |
Neuberger Berman AMT Limited Maturity Bond Portfolio (Class I) 25 |
0.65% |
-- |
0.08% |
0.73% |
-- |
0.73% |
Neuberger Berman AMT Socially Responsive Portfolio (Class I) 25, 26 |
0.85% |
-- |
0.89% |
1.74% |
0.24% |
1.50% |
1 |
The company or its U.S. affiliates receives varying levels of revenue from each of the funds available through the policy. See Fund Fees and Expenses on page 29 for additional information. |
2 |
The amounts shown are estimated operating expenses for Class S shares of each Portfolio as a ratio of expenses to average daily net assets based on each Portfolio's actual operating expenses for Class S shares for its most recently completed fiscal year, as adjusted for contractual changes, if any, and fee waivers to which Directed Services, Inc. (DSI) as adviser to each Portfolio, has agreed for each Portfolio for the current fiscal year. Other Expenses for each Portfolio include a Shareholder Services fee of 0.25%. Through a "bundled fee" arrangement, DSI, the Trust's manager, is paid a single fee for advisory, administrative, custodial, transfer agency, auditing and legal services necessary for the ordinary operation of the Portfolios. The Portfolios would also bear any extraordinary expenses. |
2a |
The amounts shown are estimated operating expenses for Class S shares of the Portfolio as a ratio of expenses to average daily net assets. Operating expenses for the Portfolio are based on estimated amounts for the current fiscal year as it had not had a full year of operations as of December 31, 2004. Other Expenses for this Portfolio include a Shareholder Services fee of 0.25%. Through a "bundled fee" arrangement, DSI, the Trust's manager, is paid a single fee for advisory, administrative, custodial, transfer agency, auditing and legal services necessary for the ordinary operation of the Portfolio. The Portfolio would also bear any extraordinary expenses. |
3 |
A portion of the brokerage commissions that the ING AIM Mid Cap Growth, and ING Van Kampen Growth and Income Portfolios pay is used to reduce each Portfolio's expenses. Including these reductions and the MFS Voluntary Management fee waiver the Total Annual Fund Operating Expenses for each Portfolio for the year ended December 31, 2004 would have been 0.87%, and 0.90%, respectively. This arrangement may be discontinued at any time. |
4 |
The amounts shown are estimated operating expenses for Class I shares of each Portfolio as a ratio of expenses to average daily net assets. Because the Class I shares for these Portfolios had not commenced operations as of December 31, 2004, expenses are based on each Portfolio's actual operating expenses for Class S shares, as adjusted for contractual changes, if any, and fee waivers to which Directed Services, Inc. (DSI), as adviser to each Portfolio, has agreed. Through a "bundled fee" arrangement, DSI, the Trust's manager, is paid a single fee for advisory, administrative, custodial, transfer agency, auditing and legal services necessary for the ordinary operation of the Portfolio. The Portfolios would also bear any extraordinary expenses. |
4a |
The amounts shown are estimated operating expenses for Class I shares of the Portfolio as a ratio of expenses to average daily net assets. Operating expenses for this Portfolio are based on estimated amounts as Class I shares had not commenced operations as of December 31, 2004 and Class S shares had not had a full year of operations as of December 31, 2004. Through a "bundled fee" arrangement, DSI, the Trust's manager, is paid a single fee for advisory, administrative, custodial, transfer agency, auditing and legal services necessary for the ordinary operation of the Portfolio. The Portfolio would also bear any extraordinary expenses. |
14 - Estate Designer |
5 |
A portion of the brokerage commissions that the ING Alliance Mid Cap Growth, ING JPMorgan Small Cap Equity, ING Legg Mason Value, ING Marsico Growth, ING MFS Mid Cap Growth, ING MFS Total Return, ING Oppenheimer Main Street, ING T. Rowe Price Capital Appreciation, and ING T. Rowe Price Equity Income Portfolios pay is used to reduce each Portfolio's expenses. Including those reductions and the MFS Voluntary Management fee waiver, the Total Annual Fund Operating Expenses for each Portfolio for the year ended December 31, 2004 would have been 0.74%, 0.87%, 0.81%, 0.75%, 0.62%, 0.63%, 0.60%, 0.65%, and 0.66%, respectively. This arrangement may be discontinued at any time. |
6 |
The amounts shown are estimated operating expenses for Class I shares of each Portfolio as a ratio of expenses to average daily net assets. Operating expenses for these Portfolios are estimated as they had not commenced operations as of December 31, 2004. Pursuant to its administration agreement with the Trust, ING Funds Services, LLC may receive an annual administration fee equal to 0.10% of average daily net assets for each Portfolio. Other Expenses for each Portfolio are estimated because it did not have a full calendar year of operations as of December 31, 2004 (the Portfolios' fiscal year end). |
7 |
Directed Services, Inc. (DSI), the adviser, has entered into a written expense limitation agreement with respect to ING FMR Earnings Growth, and ING Marsico International Opportunities Portfolios, under which it will limit expenses of these Portfolios, excluding taxes, brokerage and extraordinary expenses, subject to possible recoupment by DSI within three years. The amount of these Portfolios' expenses that are proposed to be waived or reimbursed in the ensuing fiscal year is shown under the heading Fees and Expenses Waived or Reimbursed. The expense limitation agreement will continue through at least May 1, 2006. For further information regarding the expense limitation agreements, see the Fund's prospectus. |
8 |
The amounts shown are estimated operating expenses for Class I shares of each Portfolio as a ratio of expenses to average daily net assets. These estimates are based on each Portfolio's actual operating expenses for Class I shares for its most recently completed fiscal year, as adjusted for contractual changes, if any, and fee waivers to which DSI, as adviser to each Portfolio, has agreed for each Portfolio for the current fiscal year. Through a "bundled fee" arrangement, DSI, the Trust's manager, is paid a single fee for advisory, administrative, custodial, transfer agency, auditing and legal services necessary for the ordinary operation of the Portfolio. The Portfolios would also bear any extraordinary expenses. |
9 |
Directed Services, Inc. (DSI), the adviser, has contractually agreed to waive a portion of the management fee for the Portfolio. Based upon net assets as of December 31, 2004, the management fee waiver for each Portfolio would equal 0.03% for ING JPMorgan Small Cap Equity Portfolio; and 0.05% for ING Mercury Focus Value Portfolio. This expense waiver will continue through at least May 1, 2006. There is no guarantee that this waiver will continue after this date. This agreement will only renew if DSI elects to renew it. |
10 |
The amounts shown are estimated operating expenses for Class S shares of each Portfolio as a ratio of expenses to average daily net assets. Operating expenses for each Portfolio are estimated as they had not commenced operations as of December 31, 2004. Other Expenses for each Portfolio include a Shareholder Services fee of 0.25%. Pursuant to its administration agreement with the Trust, ING Funds Services, LLC may receive an annual administration fee equal to 0.10% of average daily net assets for this Portfolio. Other Expenses for each Portfolio are estimated because the Portfolio did not have a full calendar year of operations as of December 31, 2004 (the Portfolio's fiscal year end). |
11 |
Directed Services, Inc. (DSI), the adviser, has entered into a written expense limitation agreement with respect to these Portfolios under which it will limit expenses of these Portfolios, excluding taxes, brokerage and extraordinary expenses, subject to possible recoupment by DSI within three years. The amount of these Portfolios' expenses that are proposed to be waived or reimbursed in the ensuing fiscal year is shown under the heading Fees and Expenses Waived or Reimbursed. The expense limitation agreement will continue through at least May 1, 2006. For further information regarding the expense limitation agreements, see the Fund's prospectus. |
12 |
Directed Services, Inc. (DSI), the adviser, has contractually agreed to waive a portion of the management fee for the Portfolio. Based upon net assets as of December 31, 2004, the management fee waiver for each Portfolio would equal 0.05% for ING Mercury Large Cap Growth Portfolio; and 0.02% for ING UBS U.S. Allocation Portfolio. This expense waiver will continue through at least May 1, 2006. There is no guarantee that this waiver will continue after this date. This agreement will only renew if DSI elects to renew it. |
13 |
Directed Services, Inc. (DSI) has voluntarily agreed to waive a portion of its management fee for ING MFS Mid Cap Growth Portfolio. Including this waiver, the Net Annual Fund Operating Expenses for the Portfolio for the year ended December 31, 2004 would have been 0.62%. This arrangement may be discontinued by DSI at any time. |
14 |
The amounts shown are estimated operating expenses for Class S shares of each Portfolio as a ratio of expenses to average daily net assets. Operating expenses for each Portfolio are estimated as they had not commenced operations as of December 31, 2004. Other Expenses for each Portfolio include a Shareholder Services fee of 0.25%. Through a "bundled fee" arrangement, DSI, the Trust's manager, is paid a single fee for advisory, administrative, custodial, transfer agency, auditing and legal services necessary for the ordinary operation of the Portfolios. The Portfolios would also bear any extraordinary expenses. Other Expenses for each Portfolio are estimated because the Portfolio did not have a full calendar year of operations as of December 31, 2004 (the Portfolio's fiscal year end). |
15 |
The amounts shown are estimated operating expenses for Class I shares of each Portfolio as a ratio of expenses to average daily net assets. Operating expenses for these Portfolios are estimated as they had not commenced operations as of December 31, 2004. Through a "bundled fee" arrangement, Directed Services, Inc. (DSI), the Trust's manager, is paid a single fee for advisory, administrative, custodial, transfer agency, auditing and legal services necessary for the ordinary operation of the Portfolio. The Portfolios would also bear any extraordinary expenses. Other Expenses for each Portfolio are estimated because it did not have a full calendar year of operations as of December 31, 2004 (the Portfolios' fiscal year end). |
Estate Designer - 15 |
16 |
Effective December 1, 2004, Management (Advisory) Fees were restated to reflect a decrease as follows: from 0.80% to 0.64% for ING American Century Select Portfolio; from 0.85% to 0.64% for ING T. Rowe Price Diversified Mid Cap Growth Portfolio; and from 0.85% to 0.55% for ING Van Kampen Equity and Income Portfolio. Effective December 1, 2004, the administrative fees (included in Other Expenses) were restated to reflect an increase/decrease as follows: from 0.20% to 0.02% for ING American Century Select Portfolio, ING T. Rowe Price Diversified Mid Cap Growth Portfolio and ING Van Kampen Equity and Income Portfolio; and from 0.60% to 0.06% for ING Oppenheimer Global Portfolio. |
17 |
The Administrator of the Fund has contractually agreed to waive all or a portion of its administrative services fees and/or reimburse administrative expenses for ING American Century Small Cap Value Portfolio, ING Baron Small Cap Growth Portfolio, and ING Van Kampen Comstock Portfolios so that the Net Annual Fund Operating Expenses for these Portfolios shall not exceed 1.30%, 1.20%, and 0.88%, respectively, through May 1, 2006. Without this waiver, the Net Annual Fund Operating Expenses would be 1.40% for ING American Century Small Cap Value, 1.25% for ING Baron Small Cap Growth and 0.95% for ING Van Kampen Comstock Portfolios. |
18 |
Based on estimated expenses for the current fiscal year. Other Expenses include a Shareholder Services fee of 0.25%. The Distributor of the Fund has contractually agreed to waive all or a portion of its Shareholder Services fee and/or reimburse the Shareholder Services fee for the Portfolio so that Net Annual Fund Operating Expenses do not exceed 0.75% through April 30, 2006. Without this waiver, the Net Annual Fund Operating Expenses would be 0.79%. |
19 |
The amounts shown are estimated operating expenses for Class I shares of each Portfolio as a ratio of expenses to average daily net assets. These estimates are based on each Portfolio's actual operating expenses for its most recently completed fiscal year, adjusted for contractual changes, if any, and fee waivers to which ING Investments, LLC, the investment adviser to each Portfolio, has agreed for each Portfolio. ING Funds Services, LLC receives an annual administrative fee (included in Other Expenses) equal to 0.055% on the first $5 billion of daily net assets and 0.03% thereafter. |
20 |
ING Investments, LLC, the investment adviser to each Portfolio, has entered into written expense limitation agreements with each Portfolio under which it will limit expenses of the Portfolios, excluding interest, brokerage and extraordinary expenses, subject to possible recoupment by ING Investments, LLC within three years. The amount of each Portfolio's expenses waived, reimbursed or recouped during the last fiscal year is shown under the heading Fees and Expenses Waived or Reimbursed. Recoupments are shown as negative numbers under Fees and Expenses Waived or Reimbursed. The expense limits will continue through at least May 1, 2006. For further information regarding the expense limitation agreements, see the Fund's prospectus. |
21 |
The amounts shown are the estimated operating expenses for Class I shares of each Portfolio as a ratio of expenses to average daily net assets. These estimates are based on each Portfolio's actual operating expenses for its most recently completed fiscal year, as adjusted for contractual changes, if any, and fee waivers to which ING Investments, LLC, the investment adviser to each Portfolio, has agreed for each Portfolio for the current fiscal year. |
22 |
ING Funds Services, LLC receives an annual administration fee (included in Other Expenses) equal to 0.10% of each Portfolio's average daily net assets. ING Investments, LLC has entered into a written expense limitation agreement with ING Variable Products Trust under which it will limit expenses of the Portfolios, excluding interest, taxes, brokerage and extraordinary expenses, subject to possible recoupment by ING Investments, LLC within three years. The amount of each Portfolio's expenses waived, reimbursed or recouped during the last fiscal year by ING Investments, LLC is shown under the heading Fees and Expenses Waived or Reimbursed. For each Portfolio, the expense limits will continue through at least May 1, 2006. For further information regarding the expense limitation agreements, see the Fund's prospectus. |
23 |
The amounts shown are the estimated operating expenses for Class S shares of ING VP Real Estate Portfolio based on the Portfolio's actual operating expenses for Class I shares, as adjusted for contractual changes, if any, and fee waivers to which ING Investments, LLC, the investment adviser to the Portfolio, has agreed for the Portfolio. For the ING VP Real Estate Portfolio, which has not had a full year of operations, expenses are based on estimated amounts for the current fiscal year. The estimated operating expenses for the Class S shares are based on a ratio of expenses to average daily net assets. |
24 |
Other Expenses include a Shareholder Services Fee of 0.25%. ING Funds Services, LLC receives an annual administration fee (included in Other Expenses) equal to 0.10% of each Portfolio's average daily net assets. ING Investments, LLC has entered into a written expense limitation agreement with ING Variable Products Trust under which it will limit expenses of the Portfolios, excluding interest, taxes, brokerage and extraordinary expenses, subject to possible recoupment by ING Investments, LLC within three years. The amount of expenses proposed to be waived during the current fiscal year by ING Investments, LLC for ING VP Real Estate Portfolio is shown under the heading Fees and Expenses Waived or Reimbursed. The expense limits will continue through at least May 1, 2006. For further information regarding the expense limitation agreements, see the Fund's prospectus. |
25 |
Neuberger Berman Management Inc. ("NBMI") has undertaken through December 31, 2008 to waive fees and/or reimburse certain operating expenses, including the compensation of NBMI (except with respect to Growth and Limited Maturity Bond Portfolios) and excluding taxes, interest, extraordinary expenses, brokerage commissions and transaction costs, that exceed, in the aggregate, 1% of the Growth and Limited Bond Portfolio's average daily net asset value; and 1.50% of the average daily net asset value of the Socially Responsive Portfolio. The expense limitation arrangements for the Portfolios are contractual and any excess expenses can be repaid to NBMI within three years of the year incurred, provided such recoupment would not cause a Portfolio to exceed its respective limitation. |
26 |
NBMI has voluntarily committed to waive fees and/or reimburse expenses for an additional 0.20% of the average daily net asset value of the Socially Responsive Portfolio to maintain the Portfolio's net operating expense ratio at 1.30%. NBMI can, at its sole discretion, on at least 30 days' notice terminate this voluntary waiver and/or reimbursement commitment. |
16 - Estate Designer |
How the Policy Works
Estate Designer - 17 |
We are a stock life insurance company organized in 1929 and incorporated under the laws of the State of Colorado. We are admitted to do business in the District of Columbia and all states except New York. Our headquarters is at 1290 Broadway, Denver, Colorado 80203-5699. |
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We are a wholly-owned indirect subsidiary of ING Groep N.V. ("ING"), a global financial institution active in the fields of insurance, banking and asset management. ING is headquartered in Amsterdam, The Netherlands. |
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You may allocate your premium payments to any of the available investment options. These options include the fixed account and subaccounts of the variable account. The investment performance of a policy depends on the performance of the investment options you choose. |
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In the policy the "fixed account" is referred to as the "Guaranteed Interest Division." |
You may allocate all or a part of your net premium and transfer your net policy value into the fixed account. We declare the interest rate that applies to all amounts in the fixed account. Although the interest rate will change over time, the interest rate will never be less than 3.00%. Additionally, we guarantee that the interest rate will not change more frequently than every policy anniversary. Interest compounds daily at an effective annual rate that equals the declared rate. We credit interest to the fixed account on a daily basis. We pay interest regardless of the actual investment performance of our general account. We bear all of the investment risk for the fixed account. |
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Your fixed account value equals the net premium you allocate to the fixed account, plus interest earned, minus amounts you transfer out or withdraw. It may be reduced by fees and charges assessed against your policy value. |
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The fixed account guarantees principal and is part of our general account. The general account supports our non-variable insurance and annuity obligations. We have not registered interests in the fixed account under the Securities Act of 1933, as amended ("1933 Act"). Also, we have not registered the fixed account or the general account as an investment company under the Investment Company Act of 1940, as amended ("1940 Act") (because of exemptive and exclusionary provisions). This means that the general account, the fixed account and interests in it are generally not subject to regulation under these Acts. |
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The SEC staff has not reviewed the disclosures in this prospectus relating to the general account and the fixed account. These disclosures, however, may be subject to certain requirements of the federal securities law regarding accuracy and completeness of statements made. |
18 - Estate Designer |
We established Security Life Separate Account L1 (the "variable account") on November 3, 1993, as one of our separate accounts under the laws of the State of Colorado. It is a unit investment trust, registered with the SEC under the 1940 Act. |
In the policy the "variable account" is referred to as the "Separate Account." |
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We own all of the assets of the variable account and are obligated to pay all amounts due under a policy according to the terms of the policy. Income, gains and losses credited to, or charged against, the variable account reflect the investment experience of the variable account and not the investment experience of our other assets. Additionally, Colorado law provides that we cannot charge the variable account with liabilities arising out of any other business we may conduct. This means that if we ever became insolvent, the variable account assets will be used first to pay variable account policy claims. Only if variable account assets remain after these claims have been satisfied can these assets be used to pay owners of other policies and creditors. |
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The variable account is divided into subaccounts. Each subaccount invests in a corresponding fund. When you allocate premium payments to a subaccount, you acquire accumulation units of that subaccount. You do not invest directly in or hold shares of the funds when you allocate premium payments to the subaccounts of the variable account. See Appendix B for a list of the funds available through the variable account along with information about each fund's investment adviser/subadviser and investment objective. See the Fund Expense Table which begins on page 12 for total annual fund expenses. |
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More detailed information about a fund, including information about the risks associated with investing in the fund, is located in the fund's prospectus. Read the fund prospectuses in conjunction with this prospectus, and retain the prospectuses for future reference. |
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A fund available through the variable account is not the same as a retail mutual fund with the same or similar name. Accordingly, the management, expenses and performance of a fund available through the variable account is likely to differ from a similarly named retail mutual fund. |
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Voting Privileges. We invest each subaccount's assets in shares of a corresponding fund. We are the legal owner of the fund shares held in the variable account, and we have the right to vote on certain issues. Among other things, we may vote on issues described in the fund's current prospectus or issues requiring a vote by shareholders under the 1940 Act. |
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Even though we own the shares, we give you the opportunity to tell us how to vote the number of shares attributable to your policy. We count fractional shares. If you have a voting interest, we send you proxy material and a form on which to give us your voting instructions. |
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Each fund share has the right to one vote. The votes of all fund shares are cast together on a collective basis, except on issues for which the interests of the funds differ. In these cases, voting is on a fund-by-fund basis. |
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Examples of issues that require a fund-by-fund vote are changes in the fundamental investment policy of a particular fund or approval of an investment advisory agreement. |
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We vote the shares in accordance with your instructions at meetings of the fund's shareholders. We vote any fund shares that are not attributable to policies and any fund shares for which the owner does not give us instructions in the same proportion as we vote the shares for which we did receive voting instructions. |
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We reserve the right to vote fund shares without getting instructions from policy owners if the federal securities laws, regulations or their interpretations change to allow this. |
Estate Designer - 19 |
You may instruct us only on matters relating to the funds corresponding to the subaccounts in which you have invested assets as of the record date set by the fund's Board for the shareholders meeting. We determine the number of fund shares in each subaccount of your policy by dividing your variable account value in that subaccount by the net asset value of one share of the matching fund. |
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Right to Change the Variable Account. Subject to state and federal law and the rules and regulations thereunder, we may, from time to time, make any of the following changes to our variable account with respect to some or all classes of policies: |
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We will not make a change until it is effective with the SEC and approved by the appropriate state insurance departments, if necessary. We will notify you of changes. If you wish to transfer the amount you have in the affected subaccount to another subaccount or to the fixed account, you may do so free of charge. Just notify us at our customer service center. |
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This prospectus describes our standard Estate Designer variable universal life insurance policy. The policy provides death benefits, policy values and other features of traditional life insurance contracts. There may be variations in policy features, benefits and charges because of requirements of the state where we issue your policy. We describe all such differences in your policy. |
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If you would like to know about state variations, please ask your agent/registered representative. We can provide him/her with the list of variations that will apply to your policy. |
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We and our affiliates offer various other products with different features and terms than the policies, and that may offer some or all of the same funds. These products have different benefits, fees and charges, and may or may not better match your needs. Please note that some of the company's management personnel and certain other employees may receive a portion of their employment compensation based on the amount of policy values allocated to funds affiliated with ING. You should be aware that there are alternative options available, and, if you are interested in learning more about these other products, contact our Customer Service Center or your agent/registered representative. |
20 - Estate Designer |
To purchase a policy you must submit an application to us. On that application you will, among other things, select: |
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Additionally, on the application you will provide us with certain health and other necessary information. |
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On the date coverage under the policy begins (the "policy date"), the age of the two insured people on whose lives we issue the policy (the "insured people", each an "insured person") generally can be no more than age 85. "Age" or "joint equivalent age" under a policy means the sum of both insured people's ages adjusted for the differences in age and gender, divided by two and rounded down. An individual insured person's age is measured on their birthday nearest the policy date. The individual age of each insured person generally must be no more than 90 on the policy date. There is no maximum age difference between the two insured people. |
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The insured people must share some relationship and commonly include husband and wife; business partners; parent and child; grandparent and grandchild; and siblings. Upon the death of the second of the insured people we pay the death benefit. |
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From time to time, we may accept an insured person who exceeds our normal maximum age limit. We will not unfairly discriminate in determining the maximum age at issue. All exceptions to our normal limits are dependent upon our ability to obtain acceptable reinsurance coverage for our risk with an older insured. We may also set a minimum age to issue a policy. |
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You may request that we back-date the policy up to six months to allow the insured people to give proof of a younger age for the purposes of your policy. |
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Important Information About the Adjustable Term Insurance Rider |
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It may be to your economic advantage to include all or part of your insurance coverage under the Adjustable Term Insurance Rider. Working with your agent, consider the following factors when deciding whether to include coverage under the Adjustable Term Insurance Rider and in what proportion to the total amount of coverage under your policy. |
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Estate Designer - 21 |
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With these factors in mind, you should discuss with your agent how the use of the Adjustable Term Insurance Rider will affect the costs, benefits, features and performance of your policy. You should also review illustrations based on different combinations of base policy and Adjustable Term Insurance Rider coverage so that you can decide what combination best meets your needs. The foregoing discussion does not contain all of the terms and conditions or limitations of coverage under the policy or the Adjustable Term Insurance Rider, and you should read them carefully to fully understand their benefits and limitations. See also, Adjustable Term Insurance Rider, page 36. |
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Premium payments are flexible and you may choose the amount and frequency of premium payments, within limits, including: |
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After we deduct the tax charges and the sales charge from your premium payments, we apply the remaining premium (the "net premium") to your policy as described below. |
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A premium payment is received by us when it is received at our offices. After you have paid your initial premium, we suggest you send payments directly to us, rather than through your agent/registered representative, to assure the earliest crediting date. |
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Your initial premium must be at least equal to the sum of the scheduled premium from the policy date through the investment date. The investment date is the date we apply the net premium to your policy. |
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Scheduled Premium. You may select your scheduled (planned) premium (within our limits) when you apply for your policy. The scheduled premium, shown in your policy and schedule, is the amount you choose to pay over a stated time period. This amount may or may not be enough to keep your policy in force. You may receive premium reminder notices for the scheduled premium on a quarterly, semi-annual or annual basis. You are not required to pay the scheduled premium. |
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You can change the amount of your scheduled premium within our minimum and maximum limits at any time. If you fail to pay your scheduled premium or if you change the amount of your scheduled premium, your policy performance will be affected. |
22 - Estate Designer |
Unscheduled Premium Payments. Generally speaking, you may make unscheduled premium payments at any time, however: |
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Target Premium. Target premium is not based on your scheduled premium. Target premium is actuarially determined based on the ages and genders of the insured people. The target premium is used to determine your sales charge and the sales compensation we pay. It may or may not be enough to keep your policy in force. You are not required to pay the target premium and there is no penalty for paying more or less. The target premium for your policy and additional segments is listed in your policy schedule pages. |
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Minimum Annual Premium. To qualify for the no-lapse guarantee, during each of your first five policy years you must pay at least the minimum annual premium shown in your policy. See No-Lapse Guarantee, page 35. |
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We may reduce the minimum annual premium for group or sponsored arrangements, or for corporate purchasers. |
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Unless your policy is in the no-lapse guarantee period, your coverage lasts only as long as you have a positive net policy value which is enough to pay the fees and charges due each month. If you do not meet this requirement, your policy will enter a 61-day grace period and you must make a sufficient premium payment to keep your policy from lapsing. See Lapse, page 48. |
In the policy, the "no-lapse guarantee period" is referred to as the "Special Continuation Period." |
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During the no-lapse guarantee period, we guarantee that your policy and riders will not lapse regardless of your net policy value provided your cumulative premium payments, minus any partial withdrawals and any outstanding loan amount and accrued loan interest are at least equal to your minimum annual premium. See No-Lapse Guarantee, page 35. |
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We apply the initial net premium to your policy after all of the following conditions have been met: | ||
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Amounts you designate for the fixed account will be allocated to that account on the investment date. If your state requires return of your premium during the free look period, we initially invest amounts you have designated for the subaccounts of the variable account in the subaccount which invests in the ING Liquid Assets Portfolio. We later transfer these amounts from this subaccount to your selected subaccounts, based on your most recent premium allocation instructions, at the earlier of the following dates: |
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Estate Designer - 23 |
If your state provides for return of your policy value during the free look period (or provides no free look period), we allocate amounts you designated for the subaccounts of the variable account directly into those subaccounts. |
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All net premium we receive after the applicable period are allocated to your policy on the valuation date of receipt. We will use your most recent premium allocation instructions specified in percentages stated to the nearest tenth and totaling 100%. |
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You have the right to examine your policy and return it to us (for any reason) within the period shown in the policy. The period during which you have this right is called the free look period and starts on the date you receive your policy. If you return your policy to us within the free look period, we cancel it as of your policy date. |
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If you cancel your policy during the free look period, you will receive a refund as determined by state law. Generally, there are two types of free look refunds: |
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The type of refund that applies in your state will be specified in your policy. The type of free look refund will affect when premium received before the end of the free look period is allocated to the subaccounts. See Allocation of Net Premium, page 23. |
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If you apply and qualify, we may issue temporary insurance in an amount equal to the amount of insurance coverage for which you applied, up to $4.5 million, which includes other in-force coverage each insured person has with us. |
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Temporary insurance coverage begins when all of the following events have occurred: |
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Unless otherwise provided by state law, temporary insurance coverage ends on the earliest of: |
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There is no death benefit under the temporary insurance coverage if any of the following events occur: |
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24 - Estate Designer |
During the period of temporary insurance coverage your premium payments are held by us in a general suspense account until underwriting is completed and the policy is issued or the temporary insurance coverage otherwise ends. Premiums held in this suspense account do not earn interest and they are not allocated to the investment options available under the policy until a policy is issued. See Allocation of Net Premium, page 23. |
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We deduct fees and charges under the policy to compensate us for: |
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The amount of a fee or charge may be more or less than the cost associated with the service or benefit. Accordingly, excess proceeds from one fee or charge may be used to make up a shortfall on another fee or charge, and we may earn a profit on one or more of these fees and charges. We may use any such profits for any proper corporate purpose, including, among other things, payment of sales expenses. |
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We deduct the following transaction fees and charges from your policy value each time you make certain transactions. |
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Tax Charges. We deduct 2.5% from each premium payment to cover the total average state and local taxes we expect to pay. We pay state and local taxes in most states. These taxes vary from state to state and from jurisdiction to jurisdiction. |
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We deduct 1.5% from each premium payment to cover our estimated costs for the federal income tax treatment of deferred acquisition costs. This cost is determined solely by the amount of life insurance premium we receive. |
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We may increase or decrease the charges for taxes, within limits, if there are changes in the tax rates or tax laws. |
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Sales Charge. We deduct a sales charge from each premium payment. |
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Sales Charge Percentage |
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8.0% |
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8.0% |
1.5% |
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8+ |
1.5% |
1.5% |
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When calculating your applicable sales charge, we allocate premium payments we receive after an increase in the amount of base insurance coverage to your coverage segments in the same proportion as the target premium for each segment bears to the sum of the target premium for all segments. |
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This charge helps compensate us for the costs associated with selling the policies, including promotional, advertising and distribution expenses. |
Estate Designer - 25 |
We deduct a partial withdrawal fee each time you take a partial withdrawal from your policy. The amount of this fee is 2.00% of the amount withdrawn up to $25. We deduct the partial withdrawal fee proportionately from your remaining fixed and variable account values. | |
This fee helps offset the expenses we incur when processing a partial withdrawal. |
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We currently do not assess this fee, but we reserve the right to assess a fee of up to $25 for each illustration of your policy values you request after the first each policy year. | |
This fee helps offset the costs we incur when processing requests for excess illustrations. |
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We deduct the following periodic fees and charges from your policy value each day or on the monthly processing date. The monthly processing date is the same date each month as your policy date. If that date is not a valuation date, then the monthly processing date is the next valuation date. |
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At any time you may choose one investment option from which we will deduct your periodic fees and charges. If you do not choose the investment option or the amount in your chosen investment option is not enough to cover the periodic fees and charges, then your periodic fees and charges are taken from the subaccounts and fixed account in the same proportion that your value in each has to your net policy value. |
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We deduct from your policy value a mortality and expense risk charge of 0.002055% (0.75% on an annual basis) of the amount you have invested in the subaccounts. This charge is deducted each day as part of the calculation of the daily unit values for the subaccounts and does not appear as a separate charge on your statement or confirmation. | |
This charge helps compensate us for the mortality and expense risks we assume when we issue a policy. The mortality risk is the risk that insured people, as a group, may live less time than we estimated. The expense risk is the risk that the costs of issuing and administering the policies and operating the subaccounts of the variable account are greater than we estimated. |
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Policy Charge. Each month we deduct a policy charge of $15 during the first ten policy years and $9 each month thereafter. |
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This charge helps compensate us for the costs associated with: |
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Administrative Charge. Each month we deduct an administrative charge equal to our current monthly administrative charge rates multiplied by the amount of your base insurance coverage (or total insurance coverage, if greater) divided by 1,000. The rates apply to the first $2.5 million of coverage. The rates decrease after the tenth policy year. The rates that apply to you will be set forth in your policy. See the Periodic Fees and Charges table on page 9 for the minimum and maximum administrative charge rates and the rates for representative insured people. |
26 - Estate Designer |
This charge helps offset the costs we incur in administering the policy, including costs associated with: |
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Cost of Insurance. Each month we deduct a cost of insurance charge equal to our current monthly cost of insurance rates multiplied by the net amount at risk for each segment of your base insurance coverage. The net amount at risk as calculated on each monthly processing date equals the difference between: |
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Monthly cost of insurance rates are based on the insured people's ages, genders, risk classes and amount of insurance coverage on the policy date and each date you increase your insurance coverage (a "segment date") and the segment year. They will not, however, be greater than the guaranteed cost of insurance rates shown in the policy, which are based on the 1980 Commissioner's Standard Ordinary Sex Distinct Mortality Tables. The rates that apply to you will be set forth in your policy. See the Periodic Fees and Charges table on page 9 for the minimum and maximum cost of insurance rates and the rates for the representative insured people. |
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Separate cost of insurance rates apply to each segment of your insurance coverage and your riders. The maximum rates for the initial segment and each new segment of your insurance coverage will be printed in your policy schedule pages. |
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The cost of insurance charge varies from month to month because of changes in your net amount at risk, changes in your death benefit and the increasing age of the insured people. The net amount at risk is affected by the same factors that affect your policy value, namely: |
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We calculate the net amount at risk separately for each segment of your insurance coverage. We allocate the net amount at risk to segments of the base death benefit in the same proportion that each segment has to the total base death benefit for all insurance coverage as of the monthly processing date. |
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There are no cost of insurance charges during the continuation of coverage period. |
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The cost of insurance charge compensates us for the ongoing costs of providing insurance coverage, including the expected cost of paying death benefit proceeds that may be more than your policy value. |
Estate Designer - 27 |
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There may be separate fees and charges for optional rider benefits. See the Optional Rider Fees and Charges table on page 10 and the Optional Rider Benefits section on page 35 for more information about the optional rider benefits and the applicable fees and charges. |
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Waiver and Reduction of Fees and Charges |
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We may waive or reduce any of the fees and charges under the policy, as well as the minimum amount of insurance coverage set forth in this prospectus. Any waiver or reduction will be based on expected economies that result in lower sales, administrative or mortality expenses. For example, we may expect lower expenses in connection with sales to: |
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Any variation in fees and charges will be based on differences in costs or services and our rules in effect at the time. We may change our rules from time to time, but we will not unfairly discriminate in any waiver or reduction. |
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As shown in the Fund Expense Table which begins on page 12 of this prospectus, each fund deducts management fees from the amounts allocated to the funds. In addition, each fund deducts other expenses which may include service fees which are used to compensate service providers, including the company and its affiliates, for administrative and policy owner services provided on behalf of the fund. Furthermore, certain funds deduct a distribution or 12b-1 fee, which is used to finance any activity that is primarily intended to result in the sale of fund shares. For a more complete description of the funds' fees and expenses, review each fund's prospectus. |
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The company, or its U.S. affiliates, receives from each of the funds or the funds' affiliates varying levels and types of revenue with respect to each of the funds available through the policy. In terms of the total dollar amounts received, the greatest amount of revenue comes from assets allocated to funds managed by ING Investments, LLC or other company affiliates, which funds are either not subadvised or are subadvised by another company affiliate. Assets allocated to funds managed by a company affiliate, Directed Services, Inc., for example, but which are subadvised by unaffiliated third parties generate the next greatest amount of revenue. Finally, assets allocated to unaffiliated funds generate the least amount of revenue. |
28 - Estate Designer |
Types of Revenue Received from Affiliated Funds |
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Affiliated funds are (a) funds managed by ING Investments, LLC or other company affiliates, which funds are either not subadvised or are subadvised by another company affiliate; and (b) funds managed by a company affiliate but which are subadvised by unaffiliated third parties. |
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Revenues received by the company from affiliated funds and/or their affiliates may include: |
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Types of Revenue Received from Unaffiliated Funds |
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Revenue received from each of the unaffiliated funds or their affiliates is based on an annual percentage of the average net assets held in that fund by the company. Some unaffiliated funds or their affiliates pay us more than others and some of the amounts we receive may be significant. |
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Revenues received by the company from unaffiliated funds and/or their affiliates may include: |
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The three unaffiliated fund families which currently have funds offered through the policy, ranked according to total dollar amounts they paid to the company or its affiliates in 2004, are as follows: |
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Estate Designer - 29 |
If the revenues received from affiliated funds were included in this list, payments to the company or its affiliates by ING Investments, LLC and other company affiliates would be at the top of the list. |
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Management personnel of the company and of its affiliated broker-dealers may receive additional compensation if the overall amount of investments in funds advised by company affiliates meets certain target levels or increases over time. Compensation for certain management personnel, including sales management personnel, may be enhanced if the overall amount of investments in the policies and other products issued by the company or its affiliates increases over time. Certain sales management personnel may also receive compensation that is a specific percentage of the commissions paid to distributors or of purchase payments received under the policies. |
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As a joint and survivor universal life insurance policy, your policy has a joint nature to the death benefit. We do not pay death benefit proceeds until the death of the second of the insured people. The death benefit is calculated as of the date of death of the second of the insured people. |
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In the policy the amount of insurance coverage you select is referred to as the "Face Amount." |
You decide the amount of life insurance protection you need, now and in the future. Generally, we require a minimum of $500,000 in insurance coverage to issue your policy. If you have coverage under the Adjustable Term Insurance Rider, the minimum base coverage amount is $1,000 as long as the total coverage is at least $500,000. We may lower this minimum for certain group, sponsored or corporate purchasers. The amount of insurance coverage in effect on your policy date is your initial coverage segment. |
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It may be to your economic advantage to include part of your insurance coverage under the Adjustable Term Insurance Rider. See Important Information About the Adjustable Term Insurance Rider, page 21. |
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Subject to certain limitations, generally you may change the amount of your insurance coverage after the first policy year (first monthly processing date for an increase). The change will be effective on the next monthly processing date after we receive your written request. |
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There may be underwriting or other requirements that must be met before we will approve a change. After we approve your request to change the amount of insurance coverage under the policy, we will send a new policy schedule page to you. You should attach it to your policy. We may ask you to return your policy to our customer service center so that we can make this change for you. |
30 - Estate Designer |
Changes in the amount of your insurance coverage must be for at least $1,000. |
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A coverage segment or segment is a block of insurance coverage. A requested increase in base insurance coverage will cause a new coverage segment to be created. Once we create a new segment, it is permanent unless law requires differently. |
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Each new segment will have: |
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If a death benefit option change causes the amount of base insurance coverage to increase, no new segment is created. Instead, the size of each existing segment(s) is (are) changed. If it causes the amount of base insurance coverage to decrease, each segment is decreased. |
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In determining the net amount at risk for each coverage segment we allocate the net amount at risk among the base coverage segments in the same proportion that each segment bears to the total amount of base insurance coverage. |
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You may not decrease the amount of your insurance coverage below the minimum we require to issue you a policy. Decreases in insurance coverage may result in: |
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Requested reductions in the amount of insurance coverage will first decrease your total insurance coverage amount. We decrease your base insurance coverage amount only after your Adjustable Term Insurance Rider coverage is reduced to zero. If you have more than one segment, we divide decreases in base coverage among your coverage segments pro rata unless law requires differently. |
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We reserve the right not to approve a requested change in your insurance coverage that would disqualify your policy as life insurance under Section 7702 of the Internal Revenue Code. In addition, we may refuse to approve a requested change in your insurance coverage that would cause your policy to become a modified endowment contract under Section 7702A of the Internal Revenue Code without your prior written acknowledgment accepting your policy as a modified endowment contract. Decreasing the amount of insurance coverage under your policy could cause your policy to be considered a modified endowment contract. If this happens, prior and subsequent distributions from the policy (including loans) may be subject to adverse tax treatment. You should consult a qualified tax adviser before changing your amount of insurance coverage. See Modified Endowment Contracts, page 52. |
Estate Designer - 31 |
The continuation of coverage feature automatically continues your insurance coverage in force for the period beyond the policy anniversary nearest the younger insured person's 100th birthday (the "continuation of coverage period"), unless prohibited by state law. If you do not surrender your policy before this date, on this date: |
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Your insurance coverage continues in force until the death of the second of the insured people, unless the policy lapses or is surrendered. However: |
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Partial withdrawals and loans are allowed during the continuation of coverage period. If we pay a persistency refund on the fixed account, it will be credited to your policy. If you have an outstanding loan, interest continues to accrue. If you fail to make sufficient loan or loan interest payments, it is possible that the outstanding loan amount plus accrued loan interest may become greater than your policy value and cause your policy to lapse. To avoid lapse, you may repay the loan and loan interest during the continuation of coverage period. |
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If you wish to stop coverage during the continuation of coverage period, you may surrender your policy and receive the net policy value. All other normal consequences of surrender apply. See Surrender, page 48. |
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The continuation of coverage feature is not available in all states. If a state has approved this feature, it is automatic under your policy. In certain states the death benefit during the continuation of coverage period is the net policy value. Contact your agent/registered representative or our customer service center to find out if this feature is available in your state and which type of death benefit applies in your state. |
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The tax consequences of coverage continuing beyond the younger insured person's 100th birthday are uncertain. You should consult a qualified tax adviser as to those consequences. See Continuation of a Policy, page 54. |
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The death benefit proceeds are generally not subject to federal income tax if your policy continues to meet the federal income tax definition of life insurance. Your policy will meet this definition of life insurance provided that it meets the requirements of the guideline premium test. |
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In the policy the "guideline premium test" is referred to as the "Guideline Premium/Cash Value Corridor Test." |
The guideline premium test requires that premium payments do not exceed certain statutory limits and your death benefit is at least equal to your policy value multiplied by a factor defined by law. The guideline premium test provides for a maximum amount of premium in relation to the death benefit and a minimum amount of death benefit in relation to policy value. The factors for the guideline premium test can be found in Appendix A to this prospectus. |
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Certain changes to a policy which uses the guideline premium test may allow the payment of premium in excess of the statutory limits in order to keep the policy from lapsing. In this circumstance, any such excess premium will be allocated to the fixed account in order for the policy to continue to meet the federal income tax definition of life insurance. |
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32 - Estate Designer |
Death Benefit Options |
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There are three death benefit options available under the policy. You choose the option you want when you apply for the policy. You may change that choice after your first monthly processing date and before age 100 of the younger insured person. |
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Option 1. Under death benefit option 1, the base death benefit is the greater of: |
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Under this option your base death benefit will remain level unless your policy value multiplied by the appropriate factor described in Appendix A exceeds the amount of base insurance coverage. In this case, your death benefit will vary as the policy value varies. |
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With option 1, positive investment performance generally reduces your net amount at risk, which lowers your policy's cost of insurance charge. Option 1 also offers insurance coverage at a set amount with potentially lower cost of insurance charges over time. |
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Option 2. Under death benefit option 2, the base death benefit is the greater of: |
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Under this option your base death benefit will vary as the policy value varies and investment performance is reflected in your insurance coverage. |
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Option 2 is not available after age 100 of the younger insured person. If option 2 is in effect at age 100 of the younger insured person, it automatically converts to death benefit option 1. See Continuation of Coverage, page 32. |
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Option 3. Under death benefit option 3, the base death benefit is the greater of: |
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Under this option your base death benefit will vary as you pay premiums and take withdrawals or if your policy value multiplied by the appropriate factor described in Appendix A exceeds the amount of base insurance coverage plus premiums paid minus withdrawals taken. |
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Option 3 is not available after age 100 of the younger insured person. If option 3 is in effect at age 100 of the younger insured person, it automatically converts to death benefit option 1. See Continuation of Coverage, page 32. |
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Which Death Benefit Option to Choose. If you are satisfied with the amount of your base insurance coverage and prefer to have premium payments and favorable investment performance reflected to the maximum extent in the policy value and lower cost of insurance charges, you should choose death benefit option 1. If you prefer to have premium payments and favorable investment performance reflected partly in the form of an increasing death benefit, you should choose death benefit option 2. If you require a specific death benefit which would include a return of the premium paid, death benefit option 3 may best meet your needs. |
Estate Designer - 33 |
Changing Death Benefit Options. On or after the first monthly processing date and before age 100 of the younger insured person you may change death benefit options as described below. We may require evidence of insurability under our normal rules of underwriting for some death benefit option changes. |
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Changing your death benefit option may reduce or increase your base and total insurance coverage amounts but it will not change the amount of your base and total death benefits. We may not approve a death benefit option change if it reduces the amount of insurance coverage below the minimum we require to issue your policy. The following death benefit option changes are allowed, and on the effective date of the change the amount of your base insurance coverage will change as follows: |
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Change From: |
Change To: |
Base Insurance Coverage Following the Change: |
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Option 1 |
Option 2 |
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Option 2 |
Option 1 |
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Option 3 |
Option 1 |
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Your death benefit option change is effective on your next monthly processing date after we approve it. |
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After we approve your request, we send a new policy schedule page to you. You should attach it to your policy. We may ask you to return your policy to our customer service center so that we can make this change for you. |
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If a death benefit option change causes the amount of insurance coverage to change, no new coverage segment(s) is (are) created. Instead, the size of each existing segment(s) is (are) changed. If you change death benefit options, there is no change to the amount of term insurance if you have the Adjustable Term Insurance Rider. See Adjustable Term Insurance Rider, page 36. |
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We do not adjust the target premium when you change your death benefit option. |
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Changing your death benefit option may have tax consequences. You should consult a qualified tax adviser before making changes . |
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Death Benefit Proceeds |
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After the death of the second of the insured people, if your policy is in force we pay the death benefit proceeds to the beneficiaries. The beneficiaries are the people you name to receive the death benefit proceeds from your policy. The death benefit proceeds are equal to: |
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34 - Estate Designer |
The death benefit is calculated as of the date of death of the second of the insured people and will vary depending on the death benefit option you have chosen. |
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The policy has a no-lapse guarantee which provides that the policy and riders will not lapse during the first five policy years (the no-lapse guarantee period) regardless of its net policy value, if on a monthly processing date: |
In the policy the no-lapse guarantee period is referred to as the "Special Continuation Period." |
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The minimum monthly premium is one-twelfth of the minimum annual premium. Your minimum annual premium is based on: |
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Your minimum annual premium is shown in the schedule pages of your policy. We may reduce the minimum annual premium for group or sponsored arrangements, or for corporate purchasers. |
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During the no-lapse guarantee period, if there is not enough net policy value to pay the periodic fees and charges due each month and you have satisfied these requirements, we do not allow your policy to lapse. We do not permanently waive these charges. Instead, we continue to deduct these charges which may result in a negative net policy value, unless you pay enough premium to prevent this. The negative balance is your unpaid monthly periodic fees and charges owing. At the end of the no-lapse guarantee period, to avoid lapse of your policy you must pay enough premium to bring the net policy value to zero plus the amount that covers your estimated monthly periodic fees and charges for the following two months. See Lapse, page 48. |
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There is no charge for this guarantee. |
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Your policy may include additional insurance benefits, attached by rider. There are two types of riders: |
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The following information does not include all of the terms and conditions of each rider, and you should refer to the rider to fully understand its benefits and limitations. We may offer riders not listed here. Not all riders may be available under your policy. Contact your agent/registered representative for a list of riders and their availability. |
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The following riders may have an additional cost, but you may cancel optional riders at any time. Adding or canceling riders may have tax consequences. See Modified Endowment Contracts, page 52. |
Estate Designer - 35 |
In the policy "base insurance coverage" or "base coverage" is referred to as the "Stated Death Benefit"; the "total insurance coverage" or "total coverage" is referred to as the "Target Death Benefit." |
You may increase the amount of your total insurance coverage under the policy by adding coverage under the Adjustable Term Insurance Rider before the insured people's joint equivalent age of 85, assuming both insured people are alive and insurable. This rider allows you to schedule the pattern of insurance coverage appropriate for your anticipated needs. As the name suggests, the Adjustable Term Insurance Rider adjusts over time to maintain your desired level of total coverage. | |||
You specify your amount of total insurance coverage when you apply for this rider. The amount of total insurance coverage can be level for the life of your policy or can be scheduled to change at the beginning of a selected policy year(s). See Changes in the Amount of Your Insurance Coverage, page 30. |
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Generally, the minimum amount of insurance coverage under a policy is $500,000. If you have an Adjustable Term Insurance Rider, the minimum amount of base insurance coverage to issue a policy is $1,000, as long as your total insurance coverage is at least $500,000. |
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The Adjustable Term Insurance Rider benefit is the difference between the amount of your total death benefit and your base death benefit, but not less than zero. The rider's benefit automatically adjusts daily as the amount of your base death benefit changes. Your death benefit proceeds depend on which death benefit option is in effect. |
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Under death benefit option 1, the total death benefit is the greater of: |
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Under death benefit option 2, the total death benefit is the greater of: |
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Under death benefit option 3, the total death benefit is the greater of: |
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For example, under death benefit option 1, assume your base death benefit changes as a result of a change in your policy value. The Adjustable Term Insurance Rider adjusts to provide death benefit proceeds equal to your total insurance coverage in each year: |
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$48,500 |
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$502,500 |
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$47,500 |
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$550,000 |
$47,750 |
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It is possible that the amount of your adjustable term insurance may be zero if your base death benefit increases enough. Using the same example, if the base death benefit under your policy grew to $550,000 or more, the adjustable term insurance benefit would be zero. |
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Even when the adjustable term insurance benefit is reduced to zero, your rider remains in effect until you remove it from your policy. Therefore, if later the base death benefit drops below the amount of your total insurance coverage, the Adjustable Term Insurance Rider coverage reappears to maintain the amount of your total insurance coverage. |
36 - Estate Designer |
You may change the amount of your total insurance coverage, according to our rules. See Changes in the Amount of Your Insurance Coverage, page 30. |
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We may deny future, scheduled increases to the amount of your total insurance coverage if you cancel a scheduled change or if you ask for an unscheduled decrease in your total insurance coverage. |
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Partial withdrawals, changes from death benefit option 1 to option 2, and decreases in the amount of your base insurance coverage may reduce the amount of your total insurance coverage. See Partial Withdrawals, page 45; and Changes in the Amount of Your Insurance Coverage, page 30. |
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There is no defined premium for a given amount of adjustable term insurance benefit. Instead, we deduct a separate monthly cost of insurance charge from your policy value. The cost of insurance for this rider is calculated as the monthly cost of insurance rate for the rider benefit multiplied by the amount of adjustable term insurance benefit in effect at the monthly processing date. The cost of insurance rates are determined by us from time to time. They are based on the issue ages, genders and risk classes of the insured people, as well as the length of time since your policy date. See the Optional Rider Fees and Charges table on page 10 for the minimum rates, maximum rates and the rates for the representative insured people. |
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The only charge for this rider is the cost of insurance charge. The total charges that you pay may be more or less if you have some coverage under an Adjustable Term Insurance Rider rather than just base insurance coverage. There are no sales charges for this coverage. |
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If the total insurance coverage is increased by you after the Adjustable Term Insurance Rider is issued, we use the same cost of insurance rate schedule for the entire coverage for this rider. These rates are based on the original risk classes even though satisfactory new evidence of insurability is required for the increased schedule. Although the maximum cost of insurance rates for this rider are greater than the maximum cost of insurance rates for the base insurance coverage, the current rates for this rider are generally lower than current cost of insurance rates for the base insurance coverage. See Cost of Insurance, page 27. |
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Not all policy features may apply to the Adjustable Term Insurance Rider. |
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Single Life Term Insurance Rider. This rider provides a benefit upon the death of one of the insured people under your policy. You may choose to add a single life term insurance rider for one insured person. Or, you may add two riders, one for each insured person. You may add this rider to your policy at any time if both insured people are alive and insurable according to our rules. |
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We will issue the single life term insurance rider on an insured person who is between the ages of 15 and 85. Coverage under this rider will continue until: |
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Estate Designer - 37 |
The minimum amount of coverage for a single life term insurance rider is $1,000. The maximum coverage under this rider is subject to our underwriting determinations. At issue, you may schedule the rider's benefit to increase or decrease. |
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Your request for an increase or decrease in rider coverage is effective on the next monthly processing date after we approve your request. There may be underwriting or other requirements which must be met before we approve your request. A requested change in your coverage must be for at least $1,000. If you schedule or request an increase after issue, the insured person will be subject to our underwriting requirements. |
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The charge for this rider is based on the age, gender and risk class of the insured person. The charge for this rider is deducted on each monthly processing date as a cost per each $1,000 of the net amount at risk under the rider. See the policy schedule pages for information on your actual cost. See the Optional Rider Fees and Charges table on page 10 for the minimum rates, maximum rates and the rates for a representative insured person. |
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Automatic Rider Benefit |
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The following rider benefit may come with your policy automatically. Exercising this benefit may have tax consequences. See Accelerated Death Benefit Rider, page 53. |
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Under certain circumstances, the accelerated death benefit rider allows you to accelerate payment of the death benefit that we otherwise would pay upon the second death of the insured people. Generally, we will provide an accelerated benefit under this rider if the sole surviving insured person has a terminal illness that will result in his or her death within 12 months, as certified by a physician. The accelerated benefit may not be more than 50% of the amount that would be payable at the second death of the insured people. The accelerated benefit will first be used to pay off any outstanding loans and interest due. The remainder of the accelerated benefit will be paid to you in a lump sum. There is no charge for this rider. | |
Consider the following factors when deciding whether to accelerate the death benefit under this rider: |
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Certain limitations and restrictions are described in the rider. Additionally, the benefit may vary by state. You should consult your agent/registered representative as to whether and to what extent the rider is available in your particular state and on any particular policy. |
38 - Estate Designer |
In the policy the "policy value" is referred to as the "Account Value"; the "fixed account value" is referred to as the "Account Value of the Guaranteed Interest Division"; the "variable account value" is referred to as the "Account Value of the Investment Options of the Separate Account"; and the "loan account value" is referred to as the "Account Value of the Loan Division." |
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Your policy value equals the sum of your fixed account, variable account and loan account values. Your policy value reflects: |
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Your fixed account value equals the net premium you allocate to the fixed account, plus interest earned, minus amounts you transfer out or withdraw. It may be reduced by fees and charges assessed against your policy value. See The Fixed Account, page 18. |
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Your variable account value equals your policy value attributable to amounts invested in the subaccounts of the variable account. |
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Determining Values in the Subaccounts. The value of the amount invested in each subaccount is measured by accumulation units and accumulation unit values. The value of each subaccount is the accumulation unit value for that subaccount multiplied by the number of accumulation units you own in that subaccount. Each subaccount has a different accumulation unit value. |
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The accumulation unit value is the value determined on each valuation date. The accumulation unit value of each subaccount varies with the investment performance of its underlying fund. It reflects: |
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A valuation date is a date on which a fund values its shares and the New York Stock Exchange is open for business, except for days on which valuations are suspended by the SEC. Each valuation date ends at 4:00 p.m. Eastern time. We reserve the right to revise the definition of valuation date as needed in accordance with applicable federal securities laws and regulations. |
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You purchase accumulation units when you allocate premium or make transfers to a subaccount, including transfers from the loan account. |
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We redeem accumulation units: |
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Estate Designer - 39 |
To calculate the number of accumulation units purchased or sold we divide the dollar amount of your transaction by the accumulation unit value for the subaccount calculated at the close of business on the valuation date of the transaction. |
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The date of a transaction is the date we receive your premium or transaction request at our customer service center, so long as the date of receipt is a valuation date. We use the accumulation unit value which is next calculated after we receive your premium or transaction request and we use the number of accumulation units attributable to your policy on the date of receipt. |
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We deduct the periodic fees and charges each month from your policy value on the monthly processing date. If your monthly processing date is not a valuation date, the monthly deduction is processed on the next valuation date. |
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The value of amounts allocated to the subaccounts goes up or down depending on investment performance of the corresponding funds. There is no guaranteed minimum value of amounts invested in the subaccounts of the variable account. |
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How We Calculate Accumulation Unit Values. We determine the accumulation unit value for each subaccount on each valuation date. |
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We generally set the accumulation unit value for a subaccount at $10 when the subaccount is first opened. After that, the accumulation unit value on any valuation date is: |
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Every valuation period begins at 4:00 p.m. Eastern time on a valuation date and ends at 4:00 p.m. Eastern time on the next valuation date. We reserve the right to revise the definition of valuation period as needed in accordance with applicable federal securities laws and regulations. |
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We calculate an accumulation experience factor for each subaccount every valuation date as follows: |
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In the policy the "loan account" is referred to as the "Loan Division." |
When you take a loan from your policy we transfer an amount equal to your loan to the loan account as collateral for your loan. The loan account is part of our general account and we credit interest to the amount held in the loan account. Your loan account value is equal to your outstanding loan amount plus interest in the loan account. See Loans, page 41. |
40 - Estate Designer |
You may borrow money from us at any time after the first policy month, by using your policy as collateral for the loan. Unless state law requires otherwise, a new loan amount must be at least $100 and the amount you may borrow is limited to the net policy value of your policy minus the monthly periodic fees and charges to your next policy anniversary or the monthly periodic fees and charges for the next thirteen months if you take a loan within thirty days before your next policy anniversary. |
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Your loan request must be directed to our customer service center. When you request a loan you may specify the investment options from which the collateral for the loan will be taken. If you do not specify the investment options, the collateral for the loan will be taken proportionately from each active investment option you have, including the fixed account. |
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If you request an additional loan, we add the new loan amount to your existing loan. This way, there is only one loan outstanding on your policy at any time. |
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Loan Interest. We credit amounts held in the loan account with interest at an annual rate of 3.00%. Interest which we credit to the loan account becomes part of your loan account value until the next policy anniversary when it is transferred to the investment options according to your most recent allocation instructions. |
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We also charge interest on loans you take. The annual interest rate charged is 3.75%. Interest accrues daily but is due in arrears on each policy anniversary. If you do not pay the interest when it is due, we add it to your loan amount. |
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Loan Repayment. You may repay your loan at any time. We assume that payments you make, other than scheduled premium payments, are loan repayments. You must tell us if you want unscheduled payments to be premium payments. |
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When you make a loan repayment, we transfer an amount equal to your payment from the loan account to the subaccounts and fixed account in the same proportion as your current premium allocation, unless you tell us otherwise. |
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Effects of a Loan. Using your policy as collateral for a loan will effect your policy in various ways. You should carefully consider the following before taking a loan: |
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Estate Designer - 41 |
You currently may make an unlimited number of transfers of your variable account value between the subaccounts and to the fixed account. Transfers are subject to any conditions that we or the funds whose shares are involved may impose, including: |
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Any conditions or limits we impose on transfers between the subaccounts or to the fixed account will generally apply equally to all policy owners. However, we may impose different conditions or limits on third parties acting on behalf of policy owners, such as market timing services. |
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Transfers from the fixed account to the subaccounts of the variable account may be made only during the first 30 days of each policy year and are limited to the greater of: |
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We reserve the right to liberalize these restrictions on transfers from the fixed account, depending on market conditions. Any such liberalization will generally apply equally to all policy owners. However, we may impose different restrictions on third parties acting on behalf of policy owners, such as market timing services. |
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We process all transfers and determine all values in connection with transfers on the valuation date we receive your request, except as described below for the dollar cost averaging or automatic rebalancing programs. |
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Anytime you have at least $10,000 invested in the subaccount which invests in the ING Limited Maturity Bond Portfolio, the ING Liquid Assets Portfolio or the Neuberger Berman AMT Limited Maturity Bond Portfolio (the "source subaccount"), you may elect dollar cost averaging. There is no charge for this feature. | |
Dollar cost averaging is a long-term investment program through which you direct us to automatically transfer at regular intervals a specific dollar amount or percentage of subaccount value from the source subaccount to one or more of the other subaccounts. We do not permit transfers to the fixed account or the loan account under this program. You may request that the dollar cost averaging transfers occur on a monthly, quarterly, semi-annual or annual basis. |
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This systematic plan of transferring policy values is intended to help reduce the risk of investing too much when the price of a fund's shares is high. It also helps reduce the risk of investing too little when the price of a fund's shares is low. Because you transfer the same dollar amount to the subaccounts each period, you purchase more units when the unit value is low and you purchase fewer units when the unit value is high. |
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You may add dollar cost averaging to your policy at any time. The first dollar cost averaging date must be at least one day after we receive your dollar cost averaging request. If your state requires a refund of all premium received during the free look period, dollar cost averaging begins after the end of your free look period. |
42 - Estate Designer |
You may have both dollar cost averaging and automatic rebalancing at the same time. However, your dollar cost averaging source subaccount cannot be included in your automatic rebalancing program. |
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Dollar cost averaging does not assure a profit nor does it protect you against a loss in a declining market. |
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You may discontinue your dollar cost averaging program at any time. We reserve the right to discontinue, modify or suspend this program, and dollar cost averaging will automatically terminate on: |
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Automatic rebalancing is a program for simplifying the process of asset allocation and maintaining a consistent allocation of your variable and fixed account values among your chosen investment options. There is no charge for this feature. | |
If you elect automatic rebalancing, we periodically transfer amounts among the investment options to match the asset allocation percentages you have chosen. This action rebalances the amounts in the investment options that do not match your set allocation percentages. This mismatch can happen if an investment option outperforms another investment option over the time period between automatic rebalancing transfers. |
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Automatic rebalancing may occur on the same day of the month on a monthly, quarterly, semi-annual or annual basis. If you do not specify a frequency, automatic rebalancing will occur quarterly. |
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The first transfer occurs on the date you select (after your free look period if your state requires return of premium during the free look period). If you do not request a date, processing is on the last valuation date of the calendar quarter in which we receive your request. |
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You may have both automatic rebalancing and dollar cost averaging at the same time. However, the source subaccount for your dollar cost averaging program cannot be included in your automatic rebalancing program. You may not include the loan account. |
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Automatic rebalancing does not assure a profit nor does it protect you against a loss in a declining market. |
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You may change your allocation percentages for automatic rebalancing at any time. Your allocation change is effective on the valuation date that we receive it at our customer service center. If you reduce the amount allocated to the fixed account, it is considered a transfer from that account. You must meet the requirements for the maximum transfer amount and time limitations on transfers from the fixed account. |
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You may discontinue your automatic rebalancing program at any time. We reserve the right to discontinue, modify or suspend this program, and automatic rebalancing will automatically terminate if the policy is in the grace period on any date when automatic rebalancing transfers are scheduled. |
Estate Designer - 43 |
The policy is not designed to serve as a vehicle for frequent transfers. Frequent transfer activity can disrupt management of a fund and raise its expenses through: | |
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This in turn can have an adverse effect on fund performance. Accordingly, individuals or organizations that use market-timing investment strategies or make frequent transfers should not purchase the policy. |
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We monitor transfer activity. If an individual's or organization's transfer activity (1) exceeds our then-current monitoring standard for excessive trading, (2) is identified as problematic by an underlying fund (even if the activity does not exceed our monitoring standard for excessive trading), or (3) is determined, in our sole discretion, to be not in the best interests of other policy owners we will take the following actions to deter such transfer activity. Upon the first violation, we will send a one time warning letter. A second violation will result in the suspension of transfer privileges via facsimile, telephone, email and internet, and transfer privileges will be limited to submission by regular U.S. mail for a period of six months. At the end of that period, electronic transfer privileges will be reinstated. If there is another violation after electronic transfer privileges have been reinstated, we will suspend such privileges permanently. We will notify you in wri ting if we take any of these actions. |
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Additionally, if such transfer activity is initiated by a market-timing organization or an individual or other party authorized to give transfer instructions on behalf of multiple policy owners, we will also take the following actions, without prior notice: |
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Our current definition of excessive trading is more than one purchase and sale of the same underlying fund within a 30-day period. We do not count transfers associated with scheduled dollar cost averaging or automatic rebalancing programs (including reoccurring rebalancing transactions under corporate owned policies) and transfers involving certain de minimis amounts when determining whether transfer activity is excessive. We reserve the right to modify our excessive trading policy, or the policy as it relates to a particular fund, at any time without prior notice, depending on, among other factors, the needs of the underlying fund(s), the best interests of policy owners and fund investors and/or state or federal regulatory requirements. If we modify our policy, it will be applied uniformly to all policy owners or, as applicable, to all policy owners investing in the underlying fund. |
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In addition, if an individual's or organization's transfer activity is determined, in our sole discretion, to be disruptive due to the excessive dollar amounts involved, even though the transfer activity may not fall within our then current definition of excessive trading, we will take the same actions as are described above to limit frequent transfers. |
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The company does not allow exceptions to our excessive trading policy. Our excessive trading policy may not be completely successful in preventing market timing or excessive trading activity. If it is not completely successful, fund performance and management may be adversely affected, as noted above. |
44 - Estate Designer |
Limits Imposed by the Funds. Orders for the purchase of fund shares may be subject to acceptance or rejection by the underlying fund. We reserve the right to reject, without prior notice, any allocation of a premium payment to a subaccount if the subaccount's investment in its corresponding fund is not accepted by the fund for any reason. |
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Conversion to a Guaranteed Policy. During the first two policy years you may permanently convert your policy to a guaranteed policy, unless state law requires differently. If you elect to make this change, unless state law requires that we issue to you a new guaranteed policy, we will permanently transfer the amounts you have invested in the subaccounts of the variable account to the fixed account and allocate all future net premium to the fixed account. After you exercise this right you may not allocate future premium payments or make transfers to the subaccounts of the variable account. We do not charge for this change. Contact our customer service center or your agent/registered representative for information about the conversion rights available in your state. |
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Beginning in the second policy year (or the first policy year for "in corridor" policies) you may withdraw part of your policy's surrender value. Twelve partial withdrawals are currently allowed each policy year, and a partial withdrawal must be at least $100. The maximum partial withdrawal you may take is the amount which leaves $500 as your net policy value (or for in corridor policies during the first policy year, the amount that would cause your policy to no longer qualify as "in corridor"). If your withdrawal request is for more than the maximum, we will require you to surrender your policy or reduce the amount of the withdrawal. |
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A policy is "in corridor" if: |
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We charge a partial withdrawal fee of 2.00% of the amount withdrawn, up to $25 for each partial withdrawal. See Partial Withdrawal Fee, page 26. |
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Unless you specify a different allocation, we will take partial withdrawals from the fixed account and the subaccounts of the variable account in the same proportion that your value in each has to your net policy value immediately before the withdrawal. We will determine these proportions at the end of the valuation period during which we receive your partial withdrawal request. However, amounts withdrawn from the fixed account may not exceed the amount of the total withdrawal multiplied by the ratio of your policy value in the fixed account to your net policy value immediately before the partial withdrawal. |
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Effects of a Partial Withdrawal. We will reduce your policy value by the amount of the partial withdrawal plus the partial withdrawal fee. |
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Under death benefit option 1, a partial withdrawal will reduce the amount of your base insurance coverage by the amount of a partial withdrawal unless: |
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Estate Designer - 45 |
Any amount withdrawn in excess of the greater of 10% of your policy value or 5% of the amount of your base insurance coverage will reduce the amount of your base insurance coverage by that excess amount. |
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Under death benefit option 2, a partial withdrawal will not reduce the amount of your base insurance coverage. |
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Under death benefit option 3, a partial withdrawal will reduce the amount of your base insurance coverage by the amount of a partial withdrawal in excess of the total premium we have received from you minus the sum of all your prior partial withdrawals. |
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Under death benefit option 3, if a partial withdrawal is more than the total premium we have received from you minus the sum of all your prior partial withdrawals, a two step process is used: |
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If a partial withdrawal reduces the amount of base insurance coverage, the total amount of insurance coverage will also be reduced for the current year and all future years by an equal amount. Therefore, a partial withdrawal can affect the amount of pure insurance protection under the policy. |
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We will not allow a partial withdrawal if the amount of insurance coverage after the withdrawal would be less than $500,000. |
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A reduction in the amount of base insurance coverage as a result of a partial withdrawal will be pro-rated among the existing coverage segments, unless state law requires otherwise. |
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A partial withdrawal may have adverse tax consequences depending on the circumstances. See Tax Status of the Policy, page 50. |
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Policy Split Option |
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Under certain circumstances, you may exchange your policy for two single life insurance policies: one on each of the two insured people. The policy split option has insurability requirements which must be met at or before your policy is split. Evidence of insurability is required for a new single life policy where coverage is greater than 50% of your original amount of base insurance coverage or for an insured person who is subject to certain underwriting ratings. |
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On the effective date of the policy split, the available death benefit under your policy will be divided between the two new single life insurance policies. You may take less than the maximum death benefit amount available. |
46 - Estate Designer |
Unless law requires otherwise, you may use the policy split option upon the occurrence of any of the following events: |
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You must send us written notice of your election to use the policy split option within 180 days of the eligible event. You must provide satisfactory evidence that the event has occurred. |
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The effective date of the policy split is the first monthly processing date after we approve it. The insurance coverage under the two individual life insurance policies will start on the effective date of the policy split only if both insured people are alive on that date. If either insured person is not alive on that date, your exchange is void. |
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All terms and conditions of the new policies apply once your policy is split and they may differ from those of this policy. Consult your new single life insurance policies. |
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The premium for each new policy will be based on each insured person's age, gender and risk class at the time of the split of your policy. Premium will be due for each new policy under the terms of the new policy. The policy value of the old policy will be allocated to the new policies on the effective date in the same proportion that the base insurance coverage was divided between the two single life insurance policies, unless we agree to a different allocation. If this allocation causes an increase in the base insurance coverage of either of the new single life policies, we may limit the policy value you may apply to each new policy. Remaining net policy value will be paid to you and may be taxable. |
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If you have an outstanding policy loan it will be divided and transferred to each new single life insurance policy in the same proportion as your policy value is allocated. A remaining loan balance must be paid before the effective date of the policy split. Any person or entity to which you have assigned your policy must agree to the policy split. An assignment of your policy generally will apply to each new single life insurance policy. |
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If you have a single life term insurance rider on your policy at the date of the policy split, you may have a term insurance rider insuring the same person on the new policy, if that rider is available. Other riders may or may not be available on the new policies and may be subject to proof of insurability. |
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Exercising the policy split option may be treated as a taxable transaction. Moreover, the two single life insurance policies could be treated as modified endowment contracts. |
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You may not split your policy into two single life insurance policies if: |
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You should consult a qualified tax adviser before exercising the policy split option. |
Estate Designer - 47 |
Persistency Refund |
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Where state law permits, we pay long-term policy owners a persistency refund. Each month your policy remains in force after your tenth policy anniversary, we credit your policy value with a refund of 0.05% of your policy value. This refund is 0.60% of your policy value on an annual basis. |
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We do not guarantee that we will pay a persistency refund on the fixed account. If we do, however, we will pay it even if your policy is in the continuation of coverage period. |
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We add the persistency refund to the subaccounts and fixed account, but not the loan account, in the same proportion that your policy value in each investment option has to your net policy value as of the monthly processing date. |
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Refund of Sales Charges |
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If you surrender your policy within the first two policy years and your policy has not lapsed, we may refund a portion of the sales charges we previously deducted from your premium payments. In the first policy year, the amount of the refund will not be less than 5.00% of the premium we received. In the second policy year, the refund will not be less than 2.50% of the premium we received in the first policy year. The refund of sales charge is guaranteed only for the first two policy years. We reserve the right to extend the refund of sales charges beyond the first two policy years. |
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The refund of sales charge is not available if your policy was purchased with the proceeds of a policy issued by us or one of our affiliates. Also, the refund of sales charge is not available if your policy is surrendered to another insurer as part of a Section 1035 exchange. Certain other conditions and restrictions may apply. |
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Your insurance coverage will continue under the policy until you surrender your policy or it lapses. |
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In the policy the "surrender value" is referred to as the "Net Cash Surrender Value." |
You may surrender your policy for its surrender value at any time after the free look period before the second death of the insured people. Your surrender value is your policy value plus any refund of sales charge due minus your outstanding loan amount and accrued loan interest. |
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You may take your surrender value in other than one payment. |
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We compute your surrender value as of the valuation date we receive your written surrender request and policy (or lost policy form) at our customer service center. All insurance coverage ends on the date we receive your surrender request and policy. |
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Surrender of your policy may have adverse tax consequences. See Distributions Other than Death Benefits, page 51. |
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Your policy will not lapse and your insurance coverage under the policy will continue if on any monthly processing date: |
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48 - Estate Designer |
Grace Period. If on a monthly processing date you do not meet these conditions, your policy will enter the 61-day grace period during which you must make a sufficient premium payment to avoid having your policy lapse and insurance coverage terminate. |
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We will notify you that your policy is in a grace period at least 30 days before it ends. We will send this notice to you (or a person to whom you have assigned your policy) at your last known address in our records. We will notify you of the premium payment necessary to prevent your policy from lapsing. This amount generally equals the past due charges, plus the estimated periodic fees and charges, and charges of any optional rider benefits for the next two months. If we receive payment of the required amount before the end of the grace period, we apply it to your policy in the same manner as your other premium payments, then we deduct the overdue amounts from your policy value. |
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If you do not pay the full amount within the 61-day grace period, your policy and its riders lapse without value. We withdraw your remaining variable and fixed account values, deduct amounts you owe us and inform you that your coverage has ended. |
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If the second of the insured people dies during the grace period we pay death benefit proceeds to your beneficiaries with reductions for your outstanding loan amount, accrued loan interest and periodic fees and charges owed. |
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If your policy lapses, any distribution of policy value may be subject to current taxation. See Distributions Other than Death Benefits, page 51. |
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Reinstatement means putting a lapsed policy back in force. You may reinstate a lapsed policy and its riders by written request any time within five years after it has lapsed. A policy that was surrendered may not be reinstated. |
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To reinstate the policy and any riders, you must submit evidence of insurability satisfactory to us and pay a premium large enough to keep the policy and any rider benefits in force during the grace period and for at least two months after reinstatement. We will not reinstate your policy if one insured person has died or becomes uninsurable since your policy date. If one insured person was uninsurable at the issue date of your policy and remains uninsurable, we will review the underwriting requirements applicable to each insured person at the time you request reinstatement to determine whether or not your policy may be reinstated. If you had a loan existing when coverage lapsed, we will reinstate it with accrued loan interest to the date of the lapse. |
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A policy that lapses during a seven pay testing period and is reinstated more than 90 days after lapsing will be classified as a modified endowment contract for tax purposes. In general, a seven pay testing period is the first seven policy years and the first seven years after certain changes to your policy. You should consult with a qualified tax adviser to determine whether reinstating a lapsed policy will cause it to be classified as a modified endowment contract. See Modified Endowment Contracts, page 52. |
Estate Designer - 49 |
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The following summary provides a general description of the federal income tax considerations associated with the policy and does not purport to be complete or to cover federal estate, gift and generation-skipping tax implications, state and local taxes or other tax situations. This discussion is not intended as tax advice. Counsel or other qualified tax advisers should be consulted for more complete information. This discussion is based upon our understanding of the present federal income tax laws. No representation is made as to the likelihood of continuation of the present federal income tax laws or as to how they may be interpreted by the Internal Revenue Service ("IRS"). |
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The following discussion generally assumes that the policy will qualify as a life insurance contract for federal tax purposes. |
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We are taxed as a life insurance company under the Internal Revenue Code. The variable account is not a separate entity from us. Therefore, it is not taxed separately as a "regulated investment company," but is taxed as part of the company. We automatically apply investment income and capital gains attributable to the separate account to increase reserves under the policy. Because of this, under existing federal tax law we believe that any such income and gains will not be taxed to us. In addition, any foreign tax credits attributable to the separate account will first be used to reduce any income taxes imposed on the variable account before being used by the company. |
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In summary, we do not expect that we will incur any federal income tax liability attributable to the variable account and we do not intend to make provisions for any such taxes. However, if changes in the federal tax laws or their interpretation result in our being taxed on income or gains attributable to the variable account, then we may impose a charge against the variable account (with respect to some or all of the policies) to set aside provisions to pay such taxes. |
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This policy is designed to qualify as a life insurance contract under the Internal Revenue Code. All terms and provisions of the policy shall be construed in a manner which is consistent with that design. In order to qualify as a life insurance contract for federal income tax purposes and to receive the tax treatment normally accorded life insurance contracts under federal tax law, a policy must satisfy certain requirements which are set forth in Section 7702 of the Internal Revenue Code. Specifically, the policy must meet the requirements of the guideline premium test. See Death Benefit Qualification Test, page 32. If your variable life policy does not satisfy this test, it will not be treated as life insurance under Internal Revenue Code 7702. You would then be subject to federal income tax on your policy income as you earn it. While there is very little guidance as to how these requirements are applied, we believe it is reasonable to conclude that our policies satisf y the applicable requirements. If it is subsequently determined that a policy does not satisfy the applicable requirements, we will take appropriate and reasonable steps to bring the policy into compliance with such requirements and we reserve the right to restrict policy transactions or modify your policy in order to do so. See Tax Treatment of Policy Death Benefits, page 51. |
50 - Estate Designer |
In addition to meeting the Internal Revenue Code Section 7702 guideline premium test, Internal Revenue Code Section 817(h) requires separate account investments, such as our variable account, to be adequately diversified. The Treasury has issued regulations which set the standards for measuring the adequacy of any diversification. To be adequately diversified, each subaccount must meet certain tests. If your variable life policy is not adequately diversified under these regulations, it is not treated as life insurance under Internal Revenue Code Section 7702. You would then be subject to federal income tax on your policy income as you earn it. Each subaccount's corresponding fund has represented that it will meet the diversification standards that apply to your policy. Accordingly, we believe it is reasonable to conclude that the diversification requirements have been satisfied. If it is determined that your variable life policy does not satisfy the applicable diversification regulations, we will take appropriate and reasonable steps to bring your policy into compliance with such regulations and we reserve the right to modify your policy as necessary in order to do so. |
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In certain circumstances, owners of a variable life insurance policy have been considered, for federal income tax purposes, to be the owners of the assets of the separate account supporting their policies, due to their ability to exercise investment control over such assets. When this is the case, the policy owners have been currently taxed on income and gains attributable to the separate account assets. Your ownership rights under your policy are similar to, but different in some ways from those described by the IRS in rulings in which it determined that policy owners are not owners of separate account assets. For example, you have additional flexibility in allocating your premium payments and your policy values. These differences could result in the IRS treating you as the owner of a pro rata share of the variable account assets. We do not know what standards will be set forth in the future, if any, in Treasury regulations or rulings. We reserve the right to modify your poli cy, as necessary, to try to prevent you from being considered the owner of a pro rata share of the variable account assets, or to otherwise qualify your policy for favorable tax treatment. |
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The death benefit, or an accelerated death benefit, under a policy is generally excludable from the gross income of the beneficiary(ies) under Section 101(a)(1) of the Internal Revenue Code. However, there are exceptions to this general rule. Additionally, federal and local transfer, estate, inheritance and other tax consequences of ownership or receipt of policy proceeds depend on the circumstances of each policy owner or beneficiary(ies). A qualified tax adviser should be consulted about these consequences. |
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Generally, the policy owner will not be taxed on any of the policy value until there is a distribution. When distributions from a policy occur, or when loan amounts are taken from or secured by a policy, the tax consequences depend on whether or not the policy is a "modified endowment contract." |
Estate Designer - 51 |
Under the Internal Revenue Code, certain life insurance contracts are classified as "modified endowment contracts" and are given less favorable tax treatment than other life insurance contracts. Due to the flexibility of the policies as to premiums and benefits, the individual circumstances of each policy will determine whether or not it is classified as a modified endowment contract. The rules are too complex to be summarized here, but generally depend on the amount of premiums we receive during the first seven policy years. Certain changes in a policy after it is issued, such as reduction or increase in benefits or policy reinstatement, could also cause it to be classified as a modified endowment contract. A current or prospective policy owner should consult with a qualified tax adviser to determine whether or not a policy transaction will cause the policy to be classified as a modified endowment contract. |
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If a policy becomes a modified endowment contract, distributions that occur during the policy year will be taxed as distributions from a modified endowment contract. In addition, distributions from a policy within two years before it becomes a modified endowment contract will be taxed in this manner. This means that a distribution made from a policy that is not a modified endowment contract could later become taxable as a distribution from a modified endowment contract. |
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Additionally, all modified endowment contracts that are issued by us (or our affiliates) to the same policy owner during any calendar year are treated as one modified endowment contract for purposes of determining the amount includible in the policy owner's income when a taxable distribution occurs. |
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Once a policy is classified as a modified endowment contract, the following tax rules apply both prospectively and to any distributions made in the prior two years: |
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52 - Estate Designer |
Policies That Are Not Modified Endowment Contracts |
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Distributions other than death benefits from a policy that is not classified as a modified endowment contract are generally treated first as a recovery of the policy owner's investment in the policy. Only after the recovery of all investment in the policy is there taxable income. However, certain distributions made in connection with policy benefit reductions during the first 15 policy years may be treated in whole or in part as ordinary income subject to tax. Consult a qualified tax adviser to determine whether or not any distributions made in connection with a reduction in policy benefits will be subject to tax. |
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Loan amounts from or secured by a policy that is not a modified endowment contract are generally not taxed as distributions. Finally, neither distributions from, nor loan amounts from or secured by, a policy that is not a modified endowment contract are subject to the 10% additional income tax. |
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Investment in the Policy |
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Your investment in the policy is generally the total of your aggregate premiums. When a distribution is taken from the policy, your investment in the policy is reduced by the amount of the distribution that is tax free. |
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Policy Loans |
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In general, interest on a policy loan will not be deductible. A limited exception to this rule exists for certain interest paid in connection with certain "key person" insurance. You should consult a qualified tax adviser to determine whether you qualify under this exception. |
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If a loan from a policy is outstanding when the policy is surrendered or lapses, then the amount of the outstanding indebtedness will be added to the amount treated as a distribution from the policy and will be taxed accordingly. |
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We believe that payments under the Accelerated Death Benefit Rider should be fully excludable from the gross income of the beneficiary if the beneficiary is one of the insured persons under the policy, or is an individual who has no business or financial connection with the insured persons. (See Accelerated Death Benefit Rider on page 38 for more information about this rider.) However, you should consult a qualified tax adviser about the consequences of adding this rider to a policy or requesting payment under this rider. |
Estate Designer - 53 |
The tax consequences of continuing the policy after the younger insured person reaches age 100 are unclear. For example, in certain situations it is possible that after the younger of the two insured people reaches age 100 the IRS could treat you as being in constructive receipt of the policy value if the policy value becomes equal to the death benefit. If this happens, an amount equal to the excess of the policy value over the investment in the policy would be includible in your income at that time. Because we believe the policy will continue to constitute life insurance at that time and the IRS has not issued any guidance on this issue, we do not intend to tax report any earnings due to the possibility of constructive receipt in this circumstance. You should consult a qualified tax adviser if you intend to keep the policy in force after the younger insured person reaches age 100. |
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Section 1035 Exchanges |
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Internal Revenue Code Section 1035 provides, in certain circumstances, that no gain or loss will be recognized on the exchange of one life insurance policy solely for another life insurance policy or an endowment or annuity contract. We accept 1035 exchanges with outstanding loans. Special rules and procedures apply to 1035 exchanges. These rules can be complex, and if you wish to take advantage of Section 1035, you should consult your qualified tax adviser. |
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Taxation of Policy Splits |
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The policy split option permits a policy to be split into two other single life policies upon the occurrence of: |
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Using the policy split option could have adverse tax consequences. Before you exercise the policy split option, it is important that you consult with a tax advisor regarding the possible tax consequences. |
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Tax-exempt Policy Owners |
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Special rules may apply to a policy that is owned by a tax-exempt entity. Tax-exempt entities should consult a qualified tax adviser regarding the consequences of purchasing and owning a policy. These consequences could include an effect on the tax-exempt status of the entity and the possibility of the unrelated business income tax. |
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Tax Law Changes |
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Although the likelihood of legislative action is uncertain, there is always the possibility that the tax treatment of the policy could be changed by legislation or otherwise. You should consult a qualified tax adviser with respect to legislative developments and their effect on the policy. |
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Policy Changes to Comply with the Law |
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So that your policy continues to qualify as life insurance under the Internal Revenue Code, we reserve the right to refuse to accept all or part of your premium payments or to change your death benefit. We may refuse to allow you to make partial withdrawals that would cause your policy to fail to qualify as life insurance. We also may make changes to your policy or its riders or make distributions from your policy to the degree that we deem necessary to qualify your policy as life insurance for tax purposes. |
54 - Estate Designer |
If we make any change of this type, it applies the same way to all affected policies. |
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Any increase in your death benefit will cause an increase in your cost of insurance charges. |
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Policy Availability and Qualified Plans |
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Policy owners may use the policy in various arrangements, including: |
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The tax consequences of these plans may vary depending on the particular facts and circumstances of each arrangement. If you want to use your policy with any of these various arrangements, you should consult a qualified tax adviser regarding the tax issues of your particular arrangement. |
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Life Insurance Owned by Businesses |
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In recent years, Congress has adopted new rules relating to life insurance owned by businesses. For example, in the case of a policy issued to a nonnatural taxpayer, or held for the benefit of such an entity, a portion of the taxpayer's otherwise deductible interest expenses may not be deductible as a result of ownership of a policy even if no loans are taken under the policy. (An exception to this rule is provided for certain life insurance contracts which cover the life of an individual who is a 20% owner, or an officer, director, or employee of a trade or business.) As another example, special rules apply if you are subject to the alternative minimum tax. Any business contemplating the purchase of a new policy or a change in an existing policy should consult a qualified tax adviser. |
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Income Tax Withholding |
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The IRS requires us to withhold income taxes from any portion of the amounts individuals receive in a taxable transaction. We generally do not withhold income taxes if you elect in writing not to have withholding apply. If the amount withheld for you is insufficient to cover income taxes, you will have to pay income taxes and possibly penalties later. |
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Policy Transfers |
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The transfer of the policy or designation of a beneficiary may have federal, state and/or local transfer and inheritance tax consequences, including the imposition of gift, estate and generation-skipping transfer taxes. The individual situation of each policy owner or beneficiary will determine the extent, if any, to which federal, state and local transfer and inheritance taxes may be imposed and how ownership or receipt of policy proceeds will be treated for purposes of federal, state and local estate, inheritance, generation skipping and other taxes. |
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You should consult qualified legal or tax advisers for complete information on federal, state, local and other tax considerations. |
Estate Designer - 55 |
Your Policy |
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The policy is a contract between you and us and is the combination of: |
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If you make a change to your coverage, we give you a copy of your changed application and new policy schedules. If you send your policy to us, we attach these items to your policy and return it to you. Otherwise, you need to attach them to your policy. |
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Unless there is fraud, we consider all statements made in an application to be representations and not guarantees. We use no statement to deny a claim, unless it is in an application. |
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A president or other officer of our company and our secretary or assistant secretary must sign all changes or amendments to your policy. No other person may change its terms or conditions. |
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The age stated in your policy schedule is the joint equivalent age of the insured people we use to issue your policy. The joint equivalent age is the sum of both insured people's ages adjusted for the differences in ages and genders, divided by two and rounded down. |
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The insured people must each be no more than age 90 at policy issue. The minimum joint equivalent age must be at least 15. The maximum joint equivalent age must be no more than 85. There is no limit on the difference in the insured people's ages. Age is measured as the age of the insured person on the birthday nearest the policy anniversary. |
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The policy anniversary nearest to the younger insured person's 100th birthday, whether or not he/she has survived, is the date used for continuation of coverage purposes. |
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We often use age to calculate rates, charges and values. We determine an insured person's age at a given time by adding the number of completed policy years to the age calculated at issue and shown in the policy schedule. |
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Ownership |
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The original owner is the person named as the owner in the policy application. The owner can exercise all rights and receive benefits until the death of the second of the insured people. These rights include the right to change the owner, beneficiaries or the method designated to pay death benefit proceeds. |
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As a matter of law, all rights of ownership are limited by the rights of any person who has been assigned rights under the policy and any irrevocable beneficiaries. |
56 - Estate Designer |
You may name a new owner by giving us written notice. The effective date of the change to the new owner is the date the prior owner signs the notice. However, we will not be liable for any action we take before a change is recorded at our customer service center. A change in ownership may cause the prior owner to recognize taxable income on gain under the policy. |
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Beneficiaries |
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You, as owner, name the beneficiaries when you apply for your policy. The primary beneficiaries who survive both of the insured people receive the death benefit proceeds. Other surviving beneficiaries receive death benefit proceeds only if there are no surviving primary beneficiaries. If more than one beneficiary survives both insured people, they share the death benefit proceeds equally, unless you specify otherwise. If none of your policy beneficiaries has survived both insured people, we pay the death benefit proceeds to you or to your estate, as owner. |
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You may name new beneficiaries any time before the death of the second of the insured people. We pay death benefit proceeds to the beneficiaries whom you have most recently named according to our records. We do not make payments to multiple sets of beneficiaries. The designation of certain beneficiaries may have tax consequences. See Other Tax Matters, page 53. |
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Collateral Assignment |
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You may assign your policy by sending written notice to us. After we record the assignment, your rights as owner and the beneficiaries' rights (unless the beneficiaries were made irrevocable beneficiaries under an earlier assignment) are subject to the assignment. It is your responsibility to make sure the assignment is valid. The transfer or assignment of a policy may have tax consequences. See Other Tax Matters, page 53. |
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Incontestability |
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After your policy has been in force and both insured people are alive for two years from the policy date and from the effective date of any new coverage segment, an increase in any other benefit or reinstatement, we will not question the validity of statements in your applicable application. |
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Misstatements of Age or Gender |
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Notwithstanding the Incontestability provision above, if an insured person's age or gender has been misstated, we adjust the death benefit to the amount which would have been purchased for each insured person's correct age and gender. We base the adjusted death benefit on the cost of insurance charges deducted from your policy value on the last monthly processing date before the death of the second of the insured people, or as otherwise required by law. |
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Suicide |
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If either insured person commits suicide (while sane or insane), within two years of your policy date, unless otherwise required by law, we limit death benefit proceeds to: |
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Estate Designer - 57 |
We make a limited payment to the beneficiaries for a new coverage segment or other increase if the second of the insured people commits suicide (while sane or insane), within two years of the effective date of a new coverage segment or within two years of an increase in any other benefit, unless otherwise required by law. The limited payment is equal to the cost of insurance and periodic fees and charges which were deducted for the increase. |
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In order to protect against the possible misuse of our products in money laundering or terrorist financing, we have adopted an anti-money laundering program satisfying the requirements of the USA PATRIOT Act. Among other things, this program requires us, our agents and customers to comply with certain procedures and standards that serve to assure that our customers' identities are properly verified and that premiums are not derived from improper sources. |
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Under our anti-money laundering program, we may require policy owners, insured persons and/or beneficiaries to provide sufficient evidence of identification, and we reserve the right to verify any information provided to us by accessing information databases maintained internally or by outside firms. |
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We may also refuse to accept certain forms of premium payments or loan repayments (traveler's cheques, for example) or restrict the amount of certain forms of premium payments or loan repayments (money orders totaling more than $5,000, for example). In addition, we may require information as to why a particular form of payment was used (third party checks, for example) and the source of the funds of such payment in order to determine whether or not we will accept it. Use of an unacceptable form of payment may result in us returning the payment to you and your policy either entering the 61-day grace period or lapsing. See Lapse, page 48. See also Premium Payments Affect Your Coverage, page 23. |
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Our anti-money laundering program is subject to change without notice to take account of changes applicable in laws or regulations and our ongoing assessment of our exposure to illegal activity. |
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Transaction Processing |
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Generally, within seven days of when we receive all information required to process a payment, we pay: |
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We may delay processing these transactions if: |
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58 - Estate Designer |
SEC rules and regulations generally determine whether or not these conditions exist. |
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We execute transfers among the subaccounts as of the valuation date of our receipt of your request at our customer service center. |
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We determine the death benefit as of the date of death of the second of the insured people. The death benefit proceeds are not affected by subsequent changes in the value of the subaccounts. |
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We may delay payment from our fixed account for up to six months, unless law requires otherwise, of surrender proceeds, withdrawal amounts or loan amounts. If we delay payment more than 30 days, we pay interest at our declared rate (or at a higher rate if required by law) from the date we receive your complete request. |
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Notification and Claims Procedures |
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Except for certain authorized telephone requests, we must receive in writing any election, designation, change, assignment or request made by the owner. |
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You must use a form acceptable to us. We are not liable for actions taken before we receive and record the written notice. We may require you to return your policy for changes to your policy or if you surrender it. |
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If an insured person dies while your policy is in force, please let us know as soon as possible. If it is the second death of the insured people, we will send you instructions on how to make a claim. As proof of an insured person's death, we may require proof of the deceased insured person's age and a certified copy of the death certificate. |
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The beneficiaries and the deceased insured person's next of kin may need to sign authorization forms. These forms allow us to get information such as medical records of doctors and hospitals used by the deceased insured person. |
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Telephone Privileges |
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Telephone privileges are automatically provided to you and your agent/registered representative, unless you decline it on the application or contact our customer service center. Telephone privileges allow you or your agent/registered representative to call our customer service center to: |
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Our customer service center uses reasonable procedures to make sure that instructions received by telephone are genuine. These procedures may include: |
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By accepting telephone privileges, you authorize us to record your telephone calls with us. If we use reasonable procedures to confirm instructions, we are not liable for losses from unauthorized or fraudulent instructions. We may discontinue this privilege at any time. See Limits on Frequent or Disruptive Transfers, page 44. |
Estate Designer - 59 |
Telephone and facsimile privileges may not always be available. Telephone or fax systems, whether yours, your service provider's or your agent's, can experience outages or slowdowns for a variety of reasons. These outages or slowdowns may prevent or delay our receipt of your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should make your transfer request by written request. |
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Non-participation |
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Your policy does not participate in the surplus earnings of Security Life of Denver Insurance Company. |
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Advertising Practices and Sales Literature |
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We may use advertisements and sales literature to promote this product, including: |
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We may use information regarding the past performance of the subaccounts and funds. Past performance is not indicative of future performance of the subaccounts or funds and is not reflective of the actual investment experience of policy owners. |
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We may feature certain subaccounts, the underlying funds and their managers, as well as describe asset levels and sales volumes. We may refer to past, current, or prospective economic trends, and, investment performance or other information we believe may be of interest to our customers. |
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Settlement Options |
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You may elect to take the surrender value in other than one lump-sum payment. Likewise, you may elect to have the beneficiaries receive the death benefit proceeds other than in one lump-sum payment, if you make this election before the death of the second of the insured people. If you have not made this election, the beneficiaries may do so within 60 days after we receive proof of death of the second of the insured people. |
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The investment performance of the subaccounts does not affect payments under these settlement options. Instead, interest accrues at a fixed rate based on the option you choose. Payment options are subject to our rules at the time you make your selection. Currently, a periodic payment must be at least $20 and the total proceeds must be at least $2,000. |
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The following settlement options are available: |
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60 - Estate Designer |
If none of these settlement options have been elected, your surrender value or the death benefit proceeds will be paid in one lump-sum payment. |
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Unless you request otherwise, death benefit proceeds generally will be paid into an interest bearing account which is backed by our general account and can be accessed by the beneficiary through a checkbook feature. The beneficiary may access the death benefit proceeds at any time without penalty. Interest earned on this account may be less than interest paid on other settlement options. We may also pay your surrender value using this checkbook feature. |
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Reports |
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Annual Statement. We will send you an annual statement once each policy year showing the amount of insurance coverage under your policy as well as your policy's death benefit, policy and surrender values, the amount of premiums you have paid, the amounts you have withdrawn, borrowed or transferred and the fees and charges we have imposed since the last statement. |
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We send semi-annual reports with financial information on the funds, including a list of investment holdings of each fund. |
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We send confirmation notices to you throughout the year for certain policy transactions such as transfers between investment options, partial withdrawals and loans. You are responsible for reviewing the confirmation notices to verify that the transactions are being made as requested. |
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Illustrations. To help you better understand how your policy values will vary over time under different sets of assumptions, we will provide you with a personalized illustration projecting future results based on the ages and risk classifications of the insured people and other factors such as the amount of insurance coverage, death benefit option, planned premiums and rates of return (within limits) you specify. We may assess a charge not to exceed $25 for each illustration you request after the first in a policy year. See Excess Illustration Fee, page 26. Subject to regulatory approval, personalized illustrations may be based upon a weighted average rather than an arithmetic average of fund expenses. |
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Other Reports. We will mail to you at your last known address of record at least annually a report containing such information as may be required by any applicable law. To reduce expenses, only one copy of most financial reports and prospectuses, including reports and prospectuses for the funds, will be mailed to your household, even if you or other persons in your household have more than one policy issued by us or an affiliate. Call our customer service center toll-free at 1-877-253-5050 if you need additional copies of financial reports, prospectuses, historical account information or annual or semi-annual reports or if you would like to receive one copy for each policy in all future mailings. |
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The company's affiliate, ING America Equities, Inc., serves as the principal underwriter (distributor) for the policies. ING America Equities, Inc. was organized under the laws of the State of Colorado on September 27, 1993 and is registered as a broker/dealer with the SEC and the National Association of Securities Dealers, Inc. We pay ING America Equities, Inc. under a distribution agreement dated May 1, 2002. ING America Equities, Inc.'s principal office is located at 1290 Broadway, Denver, Colorado 80203-5699. |
Estate Designer - 61 |
ING America Equities, Inc. offers the securities under the policies on a continuous basis. For the years ended December 31, 2004, 2003 and 2002, the aggregate amount of underwriting commissions paid to ING America Equities, Inc. was $29,625,725, $26,860,876 and, $31,443,393, respectively. |
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We sell our policies through licensed insurance agents who are registered representatives of affiliated and unaffiliated broker/dealers. All broker/dealers who sell this policy have entered into selling agreements with us and ING America Equities, Inc. Under these selling agreements, we pay a distribution allowance to broker/dealers, who in turn pay commissions to their agents/registered representatives who sell this policy. |
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The policy has three structures for the distribution allowance, but the structure does not affect fees or charges on your policy. |
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Under the first structure, the distribution allowance is up to 12% of the target premium we receive in the first seven policy years and a lower percentage thereafter. |
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Under the second structure, the distribution allowance is up to 30% of the target premium we receive in the first policy year and a lower percentage thereafter. |
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Under the third structure, the distribution allowance is up to 60% of the target premium we receive in the first policy year and a lower percentage thereafter. |
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For premium over target we pay less under all structures. |
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Under the first and second structures, broker/dealers receive renewal commissions (trails) of up to 0.20% of the average net policy value in policy years one through ten and a lower rate thereafter. Under the third structure, broker/dealers receive renewal commissions (trails) of up to 0.10% of the average net policy value in policy years one through ten and a lower rate thereafter. |
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Generally, the distribution allowances/commissions paid on premiums for base coverage under the policy are greater than those paid on premiums for coverage under the Adjustable Term Insurance Rider. Be aware of this and discuss with your agent/registered representative the right blend of base coverage and Adjustable Term Insurance Rider coverage for you. |
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In addition to these distribution allowances/commissions, we may also pay other amounts to broker/dealers and/or their agents/registered representatives. These amounts may include: |
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62 - Estate Designer |
We pay dealer concessions, wholesaling fees, bonuses, overrides, other allowances and benefits and the costs of all other incentives or training programs from our resources which include sales charges. |
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The following list shows the top 25 selling firms that, during 2004, received the most, in the aggregate, from us in connection with the sale of all of our variable life insurance policies, ranked by total dollars received: |
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Estate Designer - 63 |
As with many financial services companies, the company and affiliates of the company have received requests for information from various governmental and self-regulatory agencies in connection with investigations related to trading in investment company shares. In each case, full cooperation and responses are being provided. The company is also reviewing its policies and procedures in this area. |
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We are not aware of any pending legal proceedings which involve the variable account as a party. |
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We are, or may be in the future, a defendant in various legal proceedings in connection with the normal conduct of our insurance operations. Some of these cases may seek class action status and may include a demand for punitive damages as well as for compensatory damages. In the opinion of management, the ultimate resolution of any existing legal proceeding is not likely to have a material adverse effect on our ability to meet our obligations under the policy. |
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ING America Equities, Inc., the principal underwriter and distributor of the policy, is not involved in any legal proceeding which, in the opinion of management, is likely to have material adverse effect on its ability to distribute the policy. |
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Financial statements of the variable account and the company are contained in the Statement of Additional Information. To request a free Statement of Additional Information, please contact our Customer Service Center at the address or telephone number on the back of this prospectus. |
64 - Estate Designer |
Definition of Life Insurance Factors |
Guideline Premium Test Factors
Attained Age |
Factor |
Attained Age |
Factor |
Attained Age |
Factor |
Attained Age |
Factor |
Attained Age |
Factor |
0-40 |
2.50 |
48 |
1.97 |
56 |
1.46 |
64 |
1.22 |
72 |
1.11 |
41 |
2.43 |
49 |
1.91 |
57 |
1.42 |
65 |
1.20 |
73 |
1.09 |
42 |
2.36 |
50 |
1.85 |
58 |
1.38 |
66 |
1.19 |
74 |
1.07 |
43 |
2.29 |
51 |
1.78 |
59 |
1.34 |
67 |
1.18 |
75 - 90 |
1.05 |
44 |
2.22 |
52 |
1.71 |
60 |
1.30 |
68 |
1.17 |
91 |
1.04 |
45 |
2.15 |
53 |
1.64 |
61 |
1.28 |
69 |
1.16 |
92 |
1.03 |
46 |
2.09 |
54 |
1.57 |
62 |
1.26 |
70 |
1.15 |
93 |
1.02 |
47 |
2.03 |
55 |
1.50 |
63 |
1.24 |
71 |
1.13 |
94 |
1.01 |
95 + |
1.00 |
A-1 |
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The following chart lists the funds, the investment advisers and subadvisers to the funds and summary information regarding the investment objective of each fund. For information about each fund's expenses, see the Fund Expense Table on page 12 of this prospectus. More detailed information about the funds can be found in the current prospectus and Statement of Additional Information for each fund. |
There is no assurance that the stated objectives and policies of any of the funds will be achieved. Shares of the funds will rise and fall in value and you could lose money by investing in the funds. Shares of the funds are not bank deposits and are not guaranteed, endorsed or insured by any financial institution, the Federal Deposit Insurance Corporation or any other government agency. Except as noted, all funds are diversified, as defined under the 1940 Act. |
Fund Name |
Investment Adviser/Subadviser |
Investment Objective |
American Funds Insurance Series - Growth Fund - Class 2 |
Investment Adviser: |
Seeks growth of capital. |
Capital Research and Management Company |
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American Funds Insurance Series - Growth-Income Fund - Class 2 |
Investment Adviser: |
Seeks capital growth and income over time. |
Capital Research and Management Company |
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American Funds Insurance Series - International Fund - Class 2 |
Investment Adviser: |
Seeks growth of capital over time. |
Capital Research and Management Company |
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Fidelity® VIP Contrafund® Portfolio (Service Class) |
Investment Adviser: |
Seeks long-term capital appreciation. |
Fidelity Management & Research Company |
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Subadvisers: |
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Fidelity Management & Research (U.K.) Inc.; Fidelity Management & Research (Far East) Inc.; Fidelity Investments Japan Limited; FMR Co., Inc. |
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Fidelity® VIP Equity-Income Portfolio (Service Class) |
Investment Adviser: |
Seeks reasonable income. |
Fidelity Management & Research Company |
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Subadviser: |
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FMR Co., Inc. |
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Fidelity® VIP Growth Portfolio (Intial Class) |
Investment Adviser: |
Seeks to achieve capital appreciation. |
Fidelity Management & Research Company |
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Subadviser: |
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FMR Co., Inc. |
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Fidelity® VIP High Income Portfolio (Service Class) |
Investment Adviser: |
Seeks a high level of current income while also considering growth of capital. |
Fidelity Management & Research Company |
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Subadvisers: |
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Fidelity Management & Research (U.K.) Inc.; Fidelity Management & Research (Far East) Inc.; Fidelity Investments Japan Limited; FMR Co., Inc. |
B-1 |
Fund Name |
Investment Adviser/Subadviser |
Investment Objective |
Fidelity® VIP Investment Grade Bond Portfolio (Initial Class) |
Investment Adviser: |
Seeks as high a level of current income as is consistent with the preservation of capital. |
Fidelity Management & Research Company |
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Subadviser: |
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Fidelity Investments Money Management, Inc. |
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ING AIM Mid Cap Growth Portfolio (Class S) |
Investment Adviser: |
Seeks capital appreciation. |
Directed Services, Inc. |
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Subadviser: |
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A I M Capital Management, Inc. |
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ING Alliance Mid Cap Growth Portfolio (Class I) |
Investment Adviser: |
Seeks long-term total return. |
Directed Services, Inc. |
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Subadviser: |
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Alliance Capital Management, L.P. |
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ING Evergreen Health Sciences Portfolio (Class S) |
Investment Adviser: |
A non-diversified Portfolio that seeks long-term capital growth. |
Directed Services, Inc. |
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Subadviser: |
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Evergreen Investment Management Company, LLC |
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ING Evergreen Omega Portfolio (Class I) |
Investment Adviser: |
Seeks long-term capital growth. |
Directed Services, Inc. |
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Subadviser: |
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Evergreen Investment Management Company, LLC |
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ING FMRSM Earnings Growth Portfolio (Class I) |
Investment Adviser: |
Seeks growth of capital over the long term. |
Directed Services, Inc. |
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Subadviser: |
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Fidelity Management & Research Co. |
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ING Global Resources Portfolio (Class I) |
Investment Adviser: |
A non-diversified Portfolio that seeks long-term capital appreciation. |
Directed Services, Inc. |
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Subadviser: |
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Baring International Investment Limited |
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ING JPMorgan Small Cap Equity Portfolio (Class I) |
Investment Adviser: |
Seeks capital growth over the long term. |
Directed Services, Inc. |
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Subadviser: |
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J.P. Morgan Investment Management Inc. |
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ING JPMorgan Value Opportunities Portfolio (Class S) |
Investment Adviser: |
Seeks to provide long-term capital appreciation. |
Directed Services, Inc. |
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Subadviser: |
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J.P. Morgan Investment Management Inc. |
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ING Julius Baer Foreign Portfolio (Class I) |
Investment Adviser: |
Seeks long-term growth of capital. |
Directed Services, Inc. |
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Subadviser: |
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Julius Baer Investment Management, LLC |
B-2 |
Fund Name |
Investment Adviser/Subadviser |
Investment Objective |
ING Legg Mason Value Portfolio (Class I) |
Investment Adviser: |
A non-diversified portfolio that seeks long-term growth of capital. |
Directed Services, Inc. |
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Subadviser: |
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Legg Mason Funds Management, Inc. |
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ING Limited Maturity Bond Portfolio (Class S) |
Investment Adviser: |
Seeks highest current income consistent with low risk to principal and liquidity and secondarily, seeks to enhance its total return through capital appreciation when market factors indicate that capital appreciation may be available without significant risk to principal. |
Directed Services, Inc. |
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Subadviser: |
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ING Investment Management Co. |
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ING Liquid Assets Portfolio |
Investment Adviser: |
Seeks high level of current income consistent with the preservation of capital and liquidity. |
Directed Services, Inc. |
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Subadviser: |
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ING Investment Management Co. |
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ING Marsico Growth Portfolio (Class I) |
Investment Adviser: |
Seeks capital appreciation. |
Directed Services, Inc. |
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Subadviser: |
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Marsico Capital Management, LLC |
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ING Marsico International Opportunities Portfolio (Class S) |
Investment Adviser: |
Seeks long-term growth of capital. |
Directed Services, Inc. |
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Subadviser: |
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Marsico Capital Management, LLC |
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ING Mercury Focus Value Portfolio (Class I) |
Investment Adviser: |
Seeks long-term growth of capital. |
Directed Services, Inc. |
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Subadviser: |
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Mercury Advisors |
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ING Mercury Large Cap Growth Portfolio (Class S) |
Investment Adviser: |
Seeks long-term growth of capital. |
Directed Services, Inc. |
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Subadviser: |
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Mercury Advisors |
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ING MFS Mid-Cap Growth Portfolio (Class I) |
Investment Adviser: |
Seeks long-term growth of capital. |
Directed Services, Inc. |
||
Subadviser: |
||
Massachusetts Financial Services Company |
||
ING MFS Total Return Portfolio (Class I) |
Investment Adviser: |
Seeks above-average income (compared to a portfolio entirely invested in equity securities) consistent with the prudent employment of capital. |
Directed Services, Inc. |
||
Subadviser: |
||
Massachusetts Financial Services Company |
||
ING MFS Utilities Portfolio (Class S) |
Investment Adviser: |
A non-diversified portfolio that seeks capital growth and current income. |
Directed Services, Inc. |
||
Subadviser: |
||
Massachusetts Financial Services Company |
||
ING Oppenheimer Main Street Portfolio® (Class I) |
Investment Adviser: |
Seeks long-term growth of capital and future income. |
Directed Services, Inc. |
||
Subadviser: |
||
OppenheimerFunds, Inc. |
B-3 |
Fund Name |
Investment Adviser/Subadviser |
Investment Objective |
ING Pioneer Fund Portfolio (Class S) |
Investment Adviser: |
Seeks reasonable income and capital growth. |
Directed Services, Inc. |
||
Subadviser: |
||
Pioneer Investment Management, Inc. |
||
ING Pioneer Mid Cap Value Portfolio (Class I) |
Investment Adviser: |
Seeks capital appreciation. |
Directed Services, Inc. |
||
Subadviser: |
||
Pioneer Investment Management, Inc. |
||
ING Salomon Brothers Investors Portfolio (Class I) |
Investment Adviser: |
Seeks long-term growth of capital. |
Directed Services, Inc. |
||
Subadviser: |
||
Salomon Brothers Asset Management Inc. |
||
ING Stock Index Portfolio (Class I) |
Investment Adviser: |
Seeks total return. |
Directed Services, Inc. |
||
Subadviser: |
||
ING Investment Management Co. |
||
ING T. Rowe Price Capital Appreciation Portfolio (Class I) |
Investment Adviser: |
Seeks, over the long-term, a high total investment return, consistent with the preservation of capital and prudent investment risk. |
Directed Services, Inc. |
||
Subadviser: |
||
T. Rowe Price Associates, Inc. |
||
ING T. Rowe Price Equity Income Portfolio (Class I) |
Investment Adviser: |
Seeks substantial dividend income as well as long-term growth of capital. |
Directed Services, Inc. |
||
Subadviser: |
||
T. Rowe Price Associates, Inc. |
||
ING UBS U.S. Allocation Portfolio (Class S) |
Investment Adviser: |
Seeks to maximize total return over the long term by allocating its assets among stocks, bonds, short-term instruments and other investments. |
Directed Services, Inc. |
||
Subadviser: |
||
UBS Global Asset Management (Americas) Inc. |
||
ING Van Kampen Equity Growth Portfolio (Class I) |
Investment Adviser: |
Seeks long-term capital appreciation. |
Directed Services, Inc. |
||
Subadviser: |
||
Morgan Stanley Investment Management, Inc. (d/b/a Van Kampen) |
||
ING Van Kampen Growth and Income Portfolio (Class S) |
Investment Adviser: |
Seeks long-term growth of capital and income. |
Directed Services, Inc. |
||
Subadviser: |
||
Morgan Stanley Investment Management, Inc. (d/b/a Van Kampen) |
||
ING American Century Large Company Value Portfolio (Initial Class) |
Investment Adviser: |
Seeks long-term capital growth; income is a secondary objective. |
ING Life Insurance and Annuity Company |
||
Subadviser: |
||
American Century Investment Management, Inc. |
B-4 |
Fund Name |
Investment Adviser/Subadviser |
Investment Objective |
ING American Century Select Portfolio (Initial Class) |
Investment Adviser: |
Seeks long-term capital appreciation. |
ING Life Insurance and Annuity Company |
||
Subadviser: |
||
American Century Investment Management, Inc. |
||
ING American Century Small Cap Value Portfolio (Initial Class) |
Investment Adviser: |
Seeks long-term growth of capital; income is a secondary objective. |
ING Life Insurance and Annuity Company |
||
Subadviser: |
||
American Century Investment Management, Inc. |
||
ING Baron Small Cap Growth Portfolio (Initial Class) |
Investment Adviser: |
Seeks capital appreciation. |
ING Life Insurance and Annuity Company |
||
Subadviser: |
||
BAMCO, Inc. |
||
ING Fundamental Research Portfolio (Initial Class) |
Investment Adviser: |
Seeks to maximize total return through investments in a diversified portfolio of common stocks and securities convertible into common stock. |
ING Life Insurance and Annuity Company |
||
Subadviser: |
||
ING Investment Management Co. |
||
ING JPMorgan Mid Cap Value Portfolio (Initial Class) |
Investment Adviser: |
Seeks growth from capital appreciation. |
ING Life Insurance and Annuity Company |
||
Subadviser: |
||
J.P. Morgan Investment Management Inc. |
||
ING Oppenheimer Global Portfolio (Initial Class) |
Investment Adviser: |
Seeks capital appreciation. |
ING Life Insurance and Annuity Company |
||
Subadviser: |
||
OppenheimerFunds, Inc. |
||
ING Oppenheimer Strategic Income Portfolio (Service Class) |
Investment Adviser: |
Seeks a high level of current income principally derived from interest on debt securities. |
ING Life Insurance and Annuity Company |
||
Subadviser: |
||
OppenheimerFunds, Inc. |
||
ING PIMCO Total Return Portfolio (Initial Class) |
Investment Adviser: |
Seeks maximum total return, consistent with capital preservation and prudent investment management. |
ING Life Insurance and Annuity Company |
||
Subadviser: |
||
Pacific Investment Management Company LLC |
||
ING Salomon Brothers Aggressive Growth Portfolio (Initial Class) |
Investment Adviser: |
Seeks long-term growth of capital. Invests primarily (at least 80% of net assets under normal circumstances) in common stocks and related securities, such as preferred stock, convertible securities and depositary receipts, of emerging growth companies. May invest in foreign securities (including emerging market securities). |
ING Life Insurance and Annuity Company |
||
Subadviser: |
||
Salomon Brothers Asset Management Inc |
B-5 |
Fund Name |
Investment Adviser/Subadviser |
Investment Objective |
ING T. Rowe Price Diversified Mid Cap Growth Portfolio (Initial Class) |
Investment Adviser: |
Seeks long-term capital appreciation. |
ING Life Insurance and Annuity Company |
||
Subadviser: |
||
T. Rowe Price Associates, Inc. |
||
ING UBS U.S. Large Cap Equity Portfolio (Initial Class) |
Investment Adviser: |
Seeks long-term growth of capital and future income. |
ING Life Insurance and Annuity Company |
||
Subadviser: |
||
UBS Global Asset Management (Americas) Inc. |
||
ING Van Kampen Comstock Portfolio (Initial Class) |
Investment Adviser: |
Seeks capital growth and income. |
NG Life Insurance and Annuity Company |
||
Subadviser: |
||
Morgan Stanley Investment Management Inc. (d/b/a Van Kampen) |
||
ING Van Kampen Equity and Income Portfolio (Initial Class) |
Investment Adviser: |
Seeks total return, consisting of long-term capital appreciation and current income. |
ING Life Insurance and Annuity Company |
||
Subadviser: |
||
Morgan Stanley Investment Management Inc. (d/b/a Van Kampen) |
||
ING VP Intermediate Bond Portfolio (Class I) |
Investment Adviser: |
Seeks to maximize total return consistent with reasonable risk. |
ING Investments, LLC |
||
Subadviser: |
||
ING Investment Management Co. |
||
ING VP Strategic Allocation Balanced Portfolio (Class I) |
Investment Adviser: |
Seeks to provide total return (i.e., income and capital appreciation, both realized and unrealized). |
ING Investments, LLC |
||
Subadviser: |
||
ING Investment Management Co. |
||
ING VP Strategic Allocation Growth Portfolio (Class I) |
Investment Adviser: |
Seeks to provide capital appreciation. |
ING Investments, LLC |
||
Subadviser: |
||
ING Investment Management Co. |
||
ING VP Strategic Allocation Income Portfolio (Class I) |
Investment Adviser: |
Seeks to provide total return consistent with preservation of capital. |
ING Investments, LLC |
||
Subadviser: |
||
ING Investment Management Co. |
||
ING VP Index Plus LargeCap Portfolio (Class I) |
Investment Adviser: |
Seeks to outperform the total return performance of the Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index), while maintaining a market level of risk. |
ING Investments, LLC |
||
Subadviser: |
||
ING Investment Management Co. |
||
ING VP Index Plus MidCap Portfolio (Class I) |
Investment Adviser: |
Seeks to outperform the total return performance of the Standard & Poor's MidCap 400 Index (S&P MidCap 400 Index), while maintaining a market level of risk. |
ING Investments, LLC |
||
Subadviser: |
||
ING Investment Management Co. |
B-6 |
Fund Name |
Investment Adviser/Subadviser |
Investment Objective |
ING VP Index Plus SmallCap Portfolio (Class I) |
Investment Adviser: |
Seeks to outperform the total return performance of the Standard and Poor's SmallCap 600 Index (S&P SmallCap 600 Index), while maintaining a market level of risk. |
ING Investments, LLC |
||
Subadviser: |
||
ING Investment Management Co. |
||
ING VP High Yield Bond Portfolio (Class I) |
Investment Adviser: |
Seeks to provide investors with a high level of current income and total return. |
ING Investments, LLC |
||
Subadviser: |
||
ING Investment Management Co. |
||
ING VP Real Estate Portfolio (Class S) |
Investment Adviser: |
Seeks total return. |
ING Investments, LLC |
||
Subadviser: |
||
ING Clarion Real Estate Securities L.P. |
||
ING VP SmallCap Opportunities Portfolio (Class I) |
Investment Adviser: |
Seeks long-term capital appreciation. |
ING Investments, LLC |
||
Subadviser: |
||
ING Investment Management Co. |
||
Neuberger Berman AMT Growth Portfolio (Class I) |
Investment Adviser: |
Seeks growth of capital. |
Neuberger Berman Management Inc. |
||
Subadviser: |
||
Neuberger Berman, LLC |
||
Neuberger Berman AMT Limited Maturity Bond Portfolio (Class I) |
Investment Adviser: |
Seeks the highest available current income consistent with liquidity and low risk to principal; total return is a secondary goal. |
Neuberger Berman Management Inc. |
||
Subadviser: |
||
Neuberger Berman, LLC |
||
Neuberger Berman AMT Socially Responsive Portfolio (Class I) |
Investment Adviser: |
Seeks growth of capital by investing primarily in securities of companies that meet the fund's financial criteria and social policy. |
Neuberger Berman Management Inc. |
||
Subadviser: |
||
Neuberger Berman, LLC |
B-7 |
MORE INFORMATION IS AVAILABLE |
|
If you would like more information about us, the variable account or the policy, the following documents are available free upon request: |
|
|
Page |
|
General Information and History |
2 |
Performance Reporting and Advertising |
2 |
Experts |
3 |
Financial Statements |
4 |
Financial Statements of Security Life Separate Account L1 |
S-1 |
Statutory-Basis Financial Statements of Security Life of Denver Insurance |
F-1 |
|
|
To request a free SAI or personalized illustration of policy benefits or to make other inquiries about the policy, please contact us at our: |
Customer Service Center |
P.O. Box 5065 |
Minot, ND 58702-5065 |
1-877-253-5050 |
Additional information about us, the variable account or the policy (including the SAI) can be reviewed and copied from the SEC's Internet website (www.sec.gov) or at the SEC's Public Reference Room in Washington, DC. Copies of this additional information may also be obtained, upon payment of a duplicating fee, by writing the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549-0102. More information about operation of the SEC's Public Reference Room can be obtained by calling 202-942-8090. |
1940 Act File No. 811-08292 |
ASSET ACCUMULATOR |
ESTATE DESIGNER |
STRATEGIC INVESTOR |
VARIABLE SURVIVORSHIP |
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICIES |
issued by |
Security Life of Denver Insurance Company |
and its |
Security Life Separate Account L1 |
|
M Funds Supplement Dated April 29, 2005, |
to the Prospectus dated April 29, 2005 |
This Supplement adds certain information to your Prospectus, dated April 29, 2005. Please read it carefully and keep it with your Prospectus for future reference. |
______________________________________________________________________ |
Investment Portfolios . Four additional funds are currently available through your Policy: Brandes International Equity Fund; Business Opportunity Value Fund; Frontier Capital Appreciation Fund; and Turner Core Growth Fund. For a more complete description of these funds' investments, risks, costs and expenses, please see the accompanying prospectus for each fund. |
Your policy's prospectus and the fund prospectuses can be requested by calling our Customer Service Center toll-free at 1-877-253-5050. These prospectuses contain information about your policy's investment options and the various fund fees and charges. Please read your policy's prospectus and the fund prospectuses carefully before investing. |
* * * * * * * * * * * * * * * * * |
The following information is added to the Fund Expense Table beginning on page 12 of the prospectus: |
Fund Name |
Management Fees |
Distribution (12b-1) Fees |
Other Expenses |
Total Gross Annual Fund Expenses |
Fees and Expenses Waived or Reimbursed |
Total Net Annual Fund Expenses |
M Fund, Inc. Brandes International Equity Fund 27 |
0.70% |
N/A |
0.22% |
0.92% |
0.00% |
0.92% |
M Fund, Inc. Business Opportunity Value Fund 27 |
0.65% |
N/A |
0.62% |
1.27% |
0.37% |
0.90% |
M Fund, Inc. Frontier Capital Appreciation Fund 27 |
0.90% |
N/A |
0.19% |
1.09% |
0.00% |
1.09% |
M Fund, Inc. Turner Core Growth Fund 27 |
0.45% |
N/A |
0.21% |
0.66% |
0.00% |
0.66% |
27 |
For the period ending May 1, 2005 to April 30, 2006, the adviser has contractually agreed to reimburse the Fund for any expenses (other than advisory fees, brokerage or other portfolio transaction expenses or expenses for litigation, indemnification, taxes or other extraordinary expenses) to the extent that such expenses exceed 0.25% of the Fund's annualized average daily net assets. Fees and expenses shown are for the year ended December 31, 2004. Future fees and expenses may be different. |
135839 |
Page 1 of 2 |
April 2005 |
The following information is added to Appendix B of the prospectus: |
Fund Name |
Investment Adviser/Subadviser |
Investment Objective |
M Fund Brandes International Equity Fund |
Investment Adviser: |
Seeks to provide long-term capital appreciation. |
M Financial Investment Advisers, Inc. |
||
Sub-Adviser: |
||
Brandes Investment Partners, LLC |
||
M Fund Business Opportunity Value Fund |
Investment Adviser: |
Seeks to provide long-term capital appreciation. |
M Financial Investment Advisers, Inc. |
||
Sub-Adviser: |
||
Iridian Asset Management LLC |
||
M Fund Frontier Capital Appreciation Fund |
Investment Adviser: |
Seeks to provide maximum capital appreciation. |
M Financial Investment Advisers, Inc. |
||
Sub-Adviser: |
||
Frontier Capital Management Company, LLC |
||
M Fund Turner Core Growth Fund |
Investment Adviser: |
Seeks to provide long-term capital appreciation. |
M Financial Investment Advisers, Inc. |
||
Sub-Adviser: |
||
Turner Investment Partners, Inc. |
135839 |
Page 2 of 2 |
April 2005 |
ESTATE DESIGNER, |
|
FIRSTLINE AND FIRSTLINE II, |
|
VARIABLE SURVIVORSHIP |
|
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICIES |
|
issued by |
|
Security Life of Denver Insurance Company |
|
and its |
|
Security Life Separate Account L1 |
|
Supplement dated April 29, 2005, to the Prospectus dated April 29, 2005 |
|
This supplement updates certain information contained in your prospectus. Please read it carefully and keep it with your prospectus for future reference. |
|
______________________________________________________________________ |
|
IMPORTANT INFORMATION REGARDING FUND CLOSINGS |
|
Before April 29, 2005, the following funds were available through the policy: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective April 29, 2005, these funds were closed to new policy owners, and going forward, only existing policy owners with polices dated before that date are allowed to allocate policy values to these funds. |
|
More information about these funds is contained in the tables below. |
|
135846 |
Page 1 of 5 |
April 2005 |
Fund Fees and Charges. 1 The following information shows the investment advisory fees and other expenses charged annually by each of the funds referenced above. Fund fees are one of the factors that impact the value of a fund share. To learn about additional factors, please see the fund prospectuses. The following figures are a percentage of the average net assets of each fund as of December 31, 2004. |
Fund Name |
Management Fees |
Distribution (12b-1) Fees |
Other Expenses |
Total Gross Annual Fund Expenses |
Fees and Expenses Waived or Reimbursed |
Total Net Annual Fund Expenses |
AIM V.I. Capital Appreciation Fund (Series I) 2 |
0.61% |
-- |
0.30% |
0.91% |
-- |
0.91% |
AIM V.I. Core Stock Fund |
0.75% |
-- |
0.46% |
1.21% |
0.06% |
1.15% |
AIM V.I. Government Securities Fund (Series I) 2, 4 |
0.47% |
-- |
0.40% |
0.87% |
-- |
0.87% |
AIM V.I. Health Sciences Fund |
0.75% |
-- |
0.36% |
1.11% |
0.01% |
1.10% |
AIM V.I. High Yield Fund |
0.62% |
-- |
0.42% |
1.04% |
-- |
1.04% |
AIM V.I. Small Company Growth Fund (Series I) 2, 5 |
0.75% |
-- |
0.61% |
1.36% |
0.06% |
1.30% |
AIM V.I. Total Return Fund |
0.75% |
-- |
1.08% |
1.83% |
0.53% |
1.30% |
AIM V.I. Utilities Fund |
0.60% |
-- |
0.41% |
1.01% |
-- |
1.01% |
Alger American Growth Portfolio |
0.75% |
-- |
0.10% |
0.85% |
-- |
0.85% |
Alger American Leveraged AllCap Portfolio (Class O) |
0.85% |
-- |
0.12% |
0.97% |
-- |
0.97% |
Alger American MidCap Growth Portfolio (Class O) |
0.80% |
-- |
0.12% |
0.92% |
-- |
0.92% |
Fidelity® VIP Asset Manager SM Portfolio (Initial Class) |
0.53% |
-- |
0.12% |
0.65% |
-- |
0.65% |
Fidelity® VIP Overseas Portfolio (Initial Class) |
0.72% |
-- |
0.19% |
0.91% |
-- |
0.91% |
ING VP MagnaCap Portfolio |
0.75% |
-- |
0.29% |
1.04% |
0.14% |
0.90% |
ING VP MidCap Opportunities Portfolio (Class I) 6, 7 |
0.75% |
-- |
0.21% |
0.96% |
0.02% |
0.94% |
Janus Aspen International Growth Portfolio (Service Shares) 8, 9 |
0.64% |
0.25% |
0.04% |
0.93% |
-- |
0.93% |
Pioneer Mid Cap Value VCT Portfolio (Class I) |
0.65% |
-- |
0.07% |
0.72% |
-- |
0.72% |
Pioneer Small Cap Value VCT Portfolio (Class I) 10 |
0.75% |
-- |
0.55% |
1.30% |
0.05% |
1.25% |
Putnam VT Growth and Income Fund (Class IB) |
0.48% |
0.25% |
0.06% |
0.79% |
-- |
0.79% |
Putnam VT New Opportunities Fund (Class IB) |
0.60% |
0.25% |
0.09% |
0.94% |
-- |
0.94% |
Putnam VT Small Cap Value Fund |
0.77% |
0.25% |
0.10% |
1.12% |
-- |
1.12% |
Putnam VT Voyager Fund |
0.56% |
0.25% |
0.08% |
0.89% |
-- |
0.89% |
135846 |
Page 2 of 5 |
April 2005 |
Fund Name |
Management Fees |
Distribution (12b-1) Fees |
Other Expenses |
Total Gross Annual Fund Expenses |
Fees and Expenses Waived or Reimbursed |
Total Net Annual Fund Expenses |
Van Eck Worldwide Insurance Trust - Worldwide Bond Fund |
1.00% |
-- |
0.27% |
1.27% |
-- |
1.27% |
Van Eck Worldwide Insurance Trust - Emerging Markets Fund 11 |
1.00% |
-- |
0.39% |
1.39% |
-- |
1.39% |
Van Eck Worldwide Insurance Trust - Worldwide Hard Assets Fund |
1.00% |
-- |
0.20% |
1.20% |
-- |
1.20% |
Van Eck Worldwide Insurance Trust - Worldwide Real Estate Fund 12 |
1.00% |
-- |
0.45% |
1.45% |
-- |
1.45% |
1 |
We may receive compensation from each of the funds or their affiliates based on an annual percentage of the average net assets held in that fund by the company. The percentage paid may vary from one fund to another. For certain funds, some of this compensation may be paid out of 12b-1 fees or service fees that are deducted from fund assets. Any such fees deducted from fund assets are disclosed in this Fund Expense Table and the fund prospectuses. We may also receive additional payments for administrative, recordkeeping or other services which we provide to the funds or their affiliates or as an incentive for us to make the funds available through the policy. These additional payments are not disclosed in this Fund Expense Table and do not increase, directly or indirectly, the fees and expenses above. |
2 |
The Fund's advisor has contractually agreed to waive advisory fees and/or reimburse expenses of Series I shares to the extent necessary to limit Total Annual Fund Operating Expenses (excluding certain items as discussed in the fund's prospectus) of Series I shares to 1.30% of average daily net assets for each series portfolio of AIM Variable Insurance Funds except for AIM V.I. High Yield Fund and to 1.05% of average daily net assets for AIM V.I. High Yield Fund. The expense limitation agreements are in effect through April 30, 2006. Please refer to the fund's prospectus for more detailed information. |
3 |
Effective January 1, 2005 through December 31, 2009, the Fund's advisor has contractually agreed to waive a portion of its advisory fees. The fee waiver reflects this agreement. (See "Fund Management-Advisor Compensation" in the Fund's prospectus.) |
4 |
Other Expenses includes interest expense of 0.09%. |
5 |
Effective January 1, 2005 through June 30, 2006, the Fund's advisor has contractually agreed to waive a portion of its advisory fees. The fee waiver reflects this agreement. (See "Fund Management-Advisor Compensation" in the Fund's prospectus.) |
6 |
The amounts shown are the estimated operating expenses for Class I shares of each Portfolio as a ratio of expenses to average daily net assets. These estimates are based on each Portfolio's actual operating expenses for its most recently completed fiscal year, as adjusted for contractual changes, if any, and fee waivers to which ING Investments, LLC, the investment adviser to each Portfolio, has agreed for each Portfolio for the current fiscal year. |
7 |
ING Funds Services, LLC receives an annual administration fee (included in Other Expenses) equal to 0.10% of each Portfolio's average daily net assets. ING Investments, LLC has entered into a written expense limitation agreement with ING Variable Products Trust under which it will limit expenses of the Portfolios, excluding interest, taxes, brokerage and extraordinary expenses, subject to possible recoupment by ING Investments, LLC within three years. The amount of each Portfolio's expenses waived, reimbursed or recouped during the last fiscal year by ING Investments, LLC is shown under the heading Fees and Expenses Waived or Reimbursed. For each Portfolio, the expense limits will continue through at least May 1, 2006. For further information regarding the expense limitation agreements, see the Fund's prospectus. |
8 |
All of the fees and expense shown were determined based on net assets as of the fiscal year ended December 31, 2004, restated to reflect reductions in the portfolios' management fees effective July 1, 2004. All expenses are shown without the effect of expense offset arrangements. |
9 |
Because the 12b-1 fee is charged as an ongoing fee, long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc. |
10 |
The expenses in the table above reflect the contractual expense limitation in effect through May 1, 2006 under which Pioneer has agreed not to impose all or a portion of its management fee and, if necessary, to limit other ordinary operating expenses to the extent required to reduce Class I expenses to 1.25% of the average daily net assets attributable to Class I shares. |
11 |
Net effect of expense waivers, brokerage arrangements and custodian fee arrangements to average net assets for the period ended December 31, 2004 was 0.03%. Including these expense waivers and arrangements, the "Total Net Annual Fund Expenses" would have been 1.36%. |
12 |
Net effect of expense waivers, brokerage arrangements and custodian fee arrangements to average net assets for the period ended December 31, 2004 was 0.25%. Including these expense waivers and arrangements, the "Total Net Annual Fund Expenses" would have been 1.20%. |
135846 |
Page 3 of 5 |
April 2005 |
Fund Investment Advisers and Investment Objectives. The following information lists the investment advisers and subadvisers and information regarding the investment objectives of the funds referenced above. More detailed information about these funds can be found in the current prospectus and Statement of Additional Information for each fund. |
There is no assurance that the stated objectives and policies of any of the funds will be achieved. Shares of the funds will rise and fall in value and you could lose money by investing in the funds. Shares of the funds are not bank deposits and are not guaranteed, endorsed or insured by any financial institution, the Federal Deposit Insurance Corporation or any other government agency. Except as noted, all funds are diversified, as defined under the 1940 Act. |
Fund Name |
Investment Adviser/Subadviser |
Investment Objective |
AIM V.I. Capital Appreciation Fund (Series I) |
Investment Adviser: |
Seeks growth of capital. |
A I M Advisors, Inc. |
||
AIM V.I. Core Stock Fund (Series I) |
Investment Adviser: |
Seeks to provide a high total return through both growth and current income. |
A I M Advisors, Inc. |
||
Subadviser: |
||
INVESCO Institutional (N.A.), Inc. |
||
AIM V.I. Government Securities Fund (Series I) |
Investment Adviser: |
Seeks to achieve a high level of current income consistent with reasonable concern for safety of principal. |
A I M Advisors, Inc. |
||
AIM V.I. Health Sciences Fund |
Investment Adviser: |
Seeks capital growth. |
A I M Advisors, Inc. |
||
AIM V.I. High Yield Fund (Series I) |
Investment Adviser: |
Seeks to achieve a high level of current income. |
A I M Advisors, Inc. |
||
AIM V.I. Small Company Growth Fund (Series I) |
Investment Adviser: |
Seeks long-term capital growth. |
A I M Advisors, Inc. |
||
AIM V.I. Total Return Fund |
Investment Adviser: |
Seeks to provide high total return through both growth and current income. |
A I M Advisors, Inc. |
||
Subadviser: |
||
INVESCO Institutional (N.A.), Inc. |
||
AIM V.I. Utilities Fund (Series I) |
Investment Adviser: |
Seeks capital growth and current income. |
A I M Advisors, Inc. |
||
Alger American Growth Portfolio (Class O) |
Investment Adviser: |
Seeks long-term capital appreciation. |
Fred Alger Management, Inc. |
||
Alger American Leveraged AllCap Portfolio (Class O) |
Investment Adviser: |
Seeks long-term capital appreciation. |
Fred Alger Management, Inc. |
||
Alger American MidCap Growth Portfolio (Class O) |
Investment Adviser: |
Seeks long-term capital appreciation. |
Fred Alger Management, Inc. |
||
Fidelity® VIP Asset Manager SM Portfolio (Initial Class) |
Investment Adviser: |
Seeks to obtain high total return with reduced risk over the long term by allocating its assets among stocks, bonds and short-term instruments. |
Fidelity Management & Research Company |
||
Subadvisers: |
||
Fidelity Management & Research (U.K.) Inc.; Fidelity Management & Research (Far East) Inc.; Fidelity Investments Japan Limited; Fidelity Investments Money Management, Inc.; FMR Co., Inc. |
135846 |
Page 4 of 5 |
April 2005 |
Fund Name |
Investment Adviser/Subadviser |
Investment Objective |
Fidelity® VIP Overseas Portfolio (Initial Class) |
Investment Adviser: |
Seeks long-term growth of capital. |
Fidelity Management & Research Company |
||
Subadvisers: |
||
Fidelity Management & Research (U.K.) Inc.; Fidelity Management & Research (Far East) Inc.; Fidelity International Investment Advisors (U.K.) Limited; Fidelity Investments Japan Limited; FMR Co., Inc. |
||
ING VP MagnaCap Portfolio |
Investment Adviser: |
Seeks growth of capital, with dividend income as a secondary consideration. |
ING Investments, LLC |
||
Subadviser: |
||
ING Investment Management Co. |
||
ING VP MidCap Opportunities Portfolio (Class I) |
Investment Adviser: |
Seeks long-term capital appreciation. |
ING Investments, LLC |
||
Subadviser: |
||
ING Investment Management Co. |
||
Janus Aspen Series - International Growth Portfolio (Service Shares) |
Investment Adviser: |
Seeks long-term growth of capital. |
Janus Capital |
||
Pioneer Mid Cap Value VCT Portfolio (Class I) |
Investment Adviser: |
Seeks capital appreciation by investing in a diversified portfolio of securities consisting primarily of common stocks. |
Pioneer Investment Management, Inc. |
||
Pioneer Small Cap Value VCT Portfolio (Class I) |
Investment Adviser: |
Seeks capital growth by investing in a diversified portfolio of securities consisting primarily of equity securities of small companies. |
Pioneer Investment Management, Inc. |
||
Putnam VT Growth and Income Fund (Class IB) |
Investment Adviser: |
Seeks capital growth and current income. |
Putnam Investment Management, LLC |
||
Putnam VT New Opportunities Fund (Class IB) |
Investment Adviser: |
Seeks long-term capital appreciation. |
Putnam Investment Management, LLC |
||
Putnam VT Small Cap Value Fund (Class IB) |
Investment Adviser: |
Seeks capital appreciation. |
Putnam Investment Management, LLC |
||
Putnam VT Voyager Fund |
Investment Adviser: |
Seeks capital appreciation. |
Putnam Investment Management, LLC |
||
Van Eck Worldwide Bond Fund |
Investment Adviser: |
Seeks high total return -- income plus capital appreciation -- by investing globally, primarily in a variety of debt securities. |
Van Eck Associates Corporation |
||
Van Eck Worldwide Emerging Markets Fund |
Investment Adviser: |
Seeks long-term capital appreciation by investing in equity securities in emerging markets around the world. |
Van Eck Associates Corporation |
||
Van Eck Worldwide Hard Assets Fund |
Investment Adviser: |
Seeks long-term capital appreciation by investing primarily in "hard asset securities." |
Van Eck Associates Corporation |
||
Van Eck Worldwide Real Estate Fund |
Investment Adviser: |
Seeks to maximize return by investing in equity securities of domestic and foreign companies that own significant real estate assets or that principally are engaged in the real estate industry. |
Van Eck Associates Corporation |
135846 |
Page 5 of 5 |
April 2005 |
VARIABLE UNIVERSAL LIFE INSURANCE POLICY |
issued by |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
and its |
SECURITY LIFE SEPARATE ACCOUNT L1 |
Supplement dated April 29, 2005, to your prospectus dated April 29, 2005. Please read it carefully and keep it with your prospecuts for future reference. |
______________________________________________________________________ |
The "Trading - Industry Developments" section of the prospectus is hereby deleted and replaced with the following: |
Trading - Industry Developments |
Regulatory Matters |
As with many financial services companies, the company and its affiliates have received informal and formal requests for information from various state and federal governmental agencies and self-regulatory organizations in connection with inquiries and investigations of the products and practices of the financial services industry. In each case, the company and its affiliates have been and are providing full cooperation. |
Fund Regulatory Issues |
Since 2002, there has been increased governmental and regulatory activity relating to mutual funds and variable insurance products. This activity has primarily focused on inappropriate trading of fund shares, revenue sharing and directed brokerage, compensation, sales practices and suitability, arrangements with service providers, pricing, compliance and controls, and adequacy of disclosure. |
In addition to responding to governmental and regulatory requests on fund regulatory issues, ING management, on its own initiative, conducted, through special counsel and a national accounting firm, an extensive internal review of mutual fund trading in ING insurance, retirement, and mutual fund products. The goal of this review was to identify any instances of inappropriate trading in those products by third parties or by ING investment professionals and other ING personnel. |
The internal review identified several isolated arrangements allowing third parties to engage in frequent trading of mutual funds within the variable insurance and mutual fund products of certain affiliates of the company, and identified other circumstances where frequent trading occurred despite measures taken by ING intended to combat market timing. Each of the arrangements has been terminated and disclosed to regulators, to the independent trustees of ING Funds (U.S.) and in reports previously filed by affiliates of the company with the SEC pursuant to the Securities Exchange Act of 1934, as amended. |
An affiliate of the company, ING Funds Distributors, LLC ("IFD") has received notice from the staff of the National Association of Securities Dealers ("NASD") that the staff has made a preliminary determination to recommend that disciplinary action be brought against IFD and one of its registered persons for violations of the NASD Conduct Rules and federal securities laws in connection with frequent trading arrangements. |
135953 |
Page 1 of 2 |
April 2005 |
Other regulators, including the Securities and Exchange Commission ("SEC") and the New York Attorney General, are also likely to take some action with respect to certain ING affiliates before concluding their investigation of ING relating to fund trading. The potential outcome of such action is difficult to predict but could subject certain affiliates to adverse consequences, including, but not limited to, settlement payments, penalties, and other financial liability. It is not currently anticipated, however, that the actual outcome of such action will have a material adverse effect on ING or ING's U.S.-based operations, including the company. |
ING has agreed to indemnify and hold harmless the ING Funds from all damages resulting from wrongful conduct by ING or its employees or from ING's internal investigation, any investigations conducted by any governmental or self-regulatory agencies, litigation or other formal proceedings, including any proceedings by the SEC. Management reported to the ING Funds Board that ING management believes that the total amount of any indemnification obligations will not be material to ING or ING's U.S.-based operations, including the company. |
Other Regulatory Matters |
The New York Attorney General and other regulators are also conducting broad inquiries and investigations involving the insurance industry. These initiatives currently focus on, among other things, compensation and other sales incentives, potential conflicts of interest, potential anti-competitive activity, marketing practices, certain financial reinsurance arrangements, and disclosure. It is likely that the scope of these investigations will further broaden before the investigations are concluded. U.S. affiliates of ING have received formal and informal requests in connection with such investigations, and are cooperating fully with each request for information. |
These initiatives may result in new legislation and regulation that could significantly affect the financial services industry, including businesses in which the company is engaged. |
In light of these and other developments, U.S. affiliates of ING, including the company, periodically review whether modifications to their business practices are appropriate. |
135953 |
Page 2 of 2 |
April 2005 |
SECURITY LIFE SEPARATE ACCOUNT L1 |
|
Statement of Additional Information dated April 29, 2005 |
|
ESTATE DESIGNER |
|
This Statement of Additional Information is not a prospectus and should be read in conjunction with the current Estate Designer prospectus dated April 29, 2005. The policy offered in connection with the prospectus is a flexible premium variable universal life insurance policy funded through the Security Life Separate Account L1. |
|
A free prospectus is available upon request by contacting the Security Life of Denver Insurance Company's Customer Service Center at P.O. Box 5065, Minot, ND 58702-5065, by calling 1-877-253-5050 or by accessing the SEC's web site at www.sec.gov. |
|
Read the prospectus before you invest. Unless otherwise indicated, terms used in this Statement of Additional Information shall have the same meaning as in the prospectus. |
|
TABLE OF CONTENTS |
|
Page |
|
General Information and History |
2 |
Performance Reporting and Advertising |
2 |
Experts |
3 |
Financial Statements |
4 |
Financial Statements of Security Life Separate Account L1 |
S-1 |
Statutory-Basis Financial Statements of Security Life of Denver Insurance Company |
F-1 |
Security Life of Denver Insurance Company (the "company," "we," "us," "our") issues the policy described in the prospectus and is responsible for providing each policy's insurance benefits. We are a stock life insurance company organized in 1929 and incorporated under the laws of the State of Colorado and an indirect, wholly-owned subsidiary of ING Groep N.V. ("ING"), a global financial institution active in the fields of insurance, banking and asset management. ING is headquartered in Amsterdam, The Netherlands. We are engaged in the business of issuing insurance policies. Our headquarters is at 1290 Broadway, Denver, Colorado 80203-5699. |
We established the Security Life Separate Account L1 (the "variable account") on November 3, 1993, as one of our separate accounts under the laws of the State of Colorado for the purpose of funding variable life insurance policies issued by us. The variable account is registered with the Securities and Exchange Commission ("SEC") as a unit investment trust under the Investment Company Act of 1940, as amended. Premium payments may be allocated to one or more of the available sub-accounts of the variable account. Each sub-account invests in shares of a corresponding fund at net asset value. We may make additions to, deletions from or substitutions of available funds as permitted by law and subject to the conditions of the policy. |
Other than the policy owner fees and charges described in the prospectus, all expenses incurred in the operations of the variable account are borne by the company. We do, however, receive compensation for certain recordkeeping, administration or other services from the funds or affiliates of the funds available through the policies. See "Fees and Charges" in the prospectus. |
The company maintains custody of the assets of the variable account. As custodian, the company holds cash balances for the variable account pending investment in the funds or distribution. The funds in whose shares the assets of the sub-accounts of the variable account are invested each have custodians, as discussed in the respective fund prospectuses. |
Information regarding the past, or historical, performance of the sub-accounts of the variable account and the funds available for investment through the sub-accounts of the variable account may appear in advertisements, sales literature or reports to policy owners or prospective purchasers. SUCH PERFORMANCE INFORMATION FOR THE SUB-ACCOUNTS WILL REFLECT THE DEDUCTION OF ALL FUND FEES AND CHARGES, INCLUDING INVESTMENT MANAGEMENT FEES, DISTRIBUTION (12B-1) FEES AND OTHER EXPENSES BUT WILL NOT REFLECT DEDUCTIONS FOR ANY POLICY FEES AND CHARGES. IF THE POLICY'S TAX, SALES, COST OF INSURANCE, MORTALITY AND EXPENSE RISK, POLICY AND ADMINISTRATIVE CHARGES AND THE OTHER TRANSACTION, PERIODIC OR OPTIONAL BENEFITS FEES AND CHARGES WERE DEDUCTED, THE PERFORMANCE SHOWN WOULD BE SIGNIFICANTLY LOWER. |
With respect to performance reporting it is important to remember that past performance does not guarantee future results. Current performance may be higher or lower than the performance shown and actual investment returns and principal values will fluctuate so that shares and/or units, at redemption, may be worth more or less than their original cost. |
2 |
Performance history of the sub-accounts of the variable account and the corresponding funds is measured by comparing the value at the beginning of the period to the value at the end of the period. Performance is usually calculated for periods of one month, three months, year-to-date, one year, three years, five years, ten years (if the fund has been in existence for these periods) and since the inception date of the fund (if the fund has been in existence for less than ten years). We may provide performance information showing average annual total returns for periods prior to the date a sub-account commenced operation. We will calculate such performance information based on the assumption that the sub-accounts were in existence for the same periods as those indicated for the funds, with the level of charges at the variable account level that were in effect at the inception of the sub-accounts. Performance information will be specific to the class of fund shares offered through the policy, however, for periods prior to the date a class of fund shares commenced operations, performance information may be based on a different class of shares of the same fund. In this case, performance for the periods prior to the date a class of fund shares commenced operations will be adjusted by the fund fees and expenses associated with the class of fund shares offered through the policy. |
We may compare performance of the sub-accounts and/or the funds as reported from time to time in advertisements and sales literature to other variable life insurance issuers in general; to the performance of particular types of variable life insurance policies investing in mutual funds; or to investment series of mutual funds with investment objectives similar to each of the sub-accounts, whose performance is reported by Lipper Analytical Services, Inc. ("Lipper") and Morningstar. Inc. ("Morningstar") or reported by other series, companies, individuals or other industry or financial publications of general interest, such as Forbes, Money, The Wall Street Journal, Business Week, Barron's, Kiplinger's and Fortune. Lipper and Morningstar are independent services which monitor and rank the performances of variable life insurance issuers in each of the major categories of investment objectives on an industry-wide basis. |
Lipper's and Morningstar's rankings include variable annuity issuers as well as variable life insurance issuers. The performance analysis prepared by Lipper and Morningstar ranks such issuers on the basis of total return, assuming reinvestment of distributions, but does not take sales charges, redemption fees or certain expense deductions at the separate account level into consideration. We may also compare the performance of each sub-account in advertising and sales literature to the Standard & Poor's Index of 500 common stocks and the Dow Jones Industrials, which are widely used measures of stock market performance. We may also compare the performance of each sub-account to other widely recognized indices. Unmanaged indices may assume the reinvestment of dividends, but typically do not reflect any "deduction" for the expense of operating or managing an investment portfolio. |
To help you better understand how your policy's death benefits, policy value and surrender value will vary over time under different sets of assumptions, we encourage you to obtain a personalized illustration. Personalized illustrations will assume deductions for fund expenses and policy and variable account charges. We will base these illustrations on the age and risk classification of the insured person and other factors such as the amount of insurance coverage, death benefit option, premiums and rates of return (within limits) you specify. These personalized illustrations will be based on either a hypothetical investment return of the funds of 0% and other percentages not to exceed 12% or on the actual historical experience of the funds as if the sub-accounts had been in existence and a policy issued for the same periods as those indicated for the funds. Subject to regulatory approval, personalized illustrations may be based upon a weighted average of fund expenses rather t han an arithmetic average. A personalized illustration is available upon request by contacting our Customer Service Center at P.O. Box 5065, Minot, ND 58702-5065 or by calling 1-877-253-5050. |
The statements of assets and liabilities of Security Life Separate Account L1 as of December 31, 2004, and the related statement of operations for the year then ended and statements of changes in net assets for each of the two years in the period then ended and the statutory-basis financial statements of Security Life of Denver Insurance Company as of December 31, 2004 and 2003 and for the years then ended, appearing in this Statement of Additional Information, have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing. |
3 |
The financial statements of the variable account reflect the operations of the variable account as of December 31, 2004, and for the year then ended and are audited. |
The statutory-basis financial statements of the company as of December 31, 2004 and 2003 and for the years then ended are audited. The financial statements of the company should be distinguished from the financial statements of the variable account and should be considered only as bearing upon the ability of the company to meet its obligations under the policies. They should not be considered as bearing on the investment performance of the assets held in the variable account. The periods covered are not necessarily indicative of the longer term performance of the company. |
The primary business address of Ernst & Young LLP is Suite 2800, 600 Peachtree Street, Atlanta, GA 30308-2215. |
4 |
Financial Statements |
Security Life of Denver Insurance Company |
Separate Account L1 |
Year ended December 31, 2004 |
with Report of Independent Registered Public Accounting Firm |
S-1 |
This page intentionally left blank. |
S-2 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Financial Statements |
Year ended December 31, 2004 |
Contents |
|
Report of Independent Registered Public Accounting Firm |
S-5 |
Audited Financial Statements |
|
Statements of Assets and Liabilities |
S-7 |
Statements of Operations |
S-21 |
Statements of Changes in Net Assets |
S-37 |
Notes to Financial Statements |
S-57 |
S-3 |
This page intentionally left blank. |
S-4 |
Report of Independent Registered Public Accounting Firm |
The Board of Directors and Participants |
Security Life of Denver Insurance Company |
We have audited the accompanying statements of assets and liabilities of Security Life Separate Account L1 (the "Account") as of December 31, 2004, and the related statements of operations and changes in net assets for the periods disclosed in the financial statements. These financial statements are the responsibility of the Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. The Account is comprised of the following Divisions: |
AIM Variable Insurance Funds: Fidelity® VIP Asset ManagerSM Portfolio - Service Class Fidelity® VIP Growth Portfolio - Initial Class Fidelity® VIP Growth Portfolio - Service Class Fidelity® VIP Index 500 Portfolio - Initial Class Fidelity® VIP Money Market Portfolio - Initial Class Fidelity® VIP Overseas Portfolio - Initial Class Fidelity® VIP Overseas Portfolio - Service Class |
ING Income Shares: |
S-5 |
ING Partners, Inc. (continued): |
M Fund, Inc: |
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Account's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Account's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures also included confirmation of securities owned as of December 31, 2004, by correspondence with the transfer agents. We believe that our audits provide a reasonable basis for our opinion. |
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the Divisions of the Security Life Separate Account L1 at December 31, 2004, and the results of their operations and changes in their net assets for the periods disclosed in the financial statements, in conformity with U.S. generally accepted accounting principles. |
/s/ Ernst & Young |
Atlanta, Georgia |
March 15, 2005 |
S-6 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Assets and Liabilities |
December 31, 2004 |
(Dollars in thousands, except for unit data) |
AIM V.I. |
AIM V.I. |
AIM V.I. |
||||||||||||
Capital |
AIM V.I. |
Government |
Health |
AIM V.I. |
||||||||||
Appreciation |
Core Stock |
Securities |
Sciences |
High Yield |
||||||||||
Assets |
||||||||||||||
Investments in mutual funds |
||||||||||||||
at fair value |
$ 11,882 |
$ 23,377 |
$ 24,056 |
$ 1,261 |
$ 27,903 |
|||||||||
Total assets |
11,882 |
23,377 |
24,056 |
1,261 |
27,903 |
|||||||||
Net assets |
$ 11,882 |
$ 23,377 |
$ 24,056 |
$ 1,261 |
$ 27,903 |
|||||||||
Number of units outstanding: |
||||||||||||||
Class A |
173,622.582 |
274,345.600 |
304,345.787 |
43,492.331 |
271,051.064 |
|||||||||
Class B |
904,694.485 |
829,670.167 |
1,507,721.843 |
69,530.605 |
2,306,560.281 |
|||||||||
Value per unit: |
||||||||||||||
Class A |
$ 9.71 |
$ 10.15 |
$ 13.45 |
$ 11.30 |
$ 10.87 |
|||||||||
Class B |
$ 11.27 |
$ 24.82 |
$ 13.24 |
$ 11.07 |
$ 10.82 |
|||||||||
Total number of |
||||||||||||||
mutual fund shares |
523,657 |
|
1,262,940 |
|
1,993,015 |
66,728 |
4,326,094 |
|||||||
Cost of mutual fund shares |
$ 9,991 |
$ 21,564 |
$ 24,661 |
$ 1,186 |
$ 26,373 |
The accompanying notes are an integral part of these financial statements. |
S-7 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Assets and Liabilities |
December 31, 2004 |
(Dollars in thousands, except for unit data) |
AIM V.I. |
Alger |
|||||||||||||
Small |
Alger |
American |
||||||||||||
Company |
AIM V.I. |
AIM V.I. |
American |
Leveraged |
||||||||||
Growth |
Total Return |
Utilities |
Growth |
AllCap |
||||||||||
Assets |
||||||||||||||
Investments in mutual funds |
||||||||||||||
at fair value |
$ 15,001 |
$ 9,177 |
$ 11,139 |
$ 43,063 |
$ 19,364 |
|||||||||
Total assets |
15,001 |
9,177 |
11,139 |
43,063 |
19,364 |
|||||||||
Net assets |
$ 15,001 |
$ 9,177 |
$ 11,139 |
$ 43,063 |
$ 19,364 |
|||||||||
Number of units outstanding: |
||||||||||||||
Class A |
176,428.166 |
58,261.569 |
140,672.258 |
463,304.264 |
250,485.353 |
|||||||||
Class B |
885,679.728 |
489,941.026 |
576,598.461 |
1,717,809.651 |
537,253.813 |
|||||||||
Value per unit: |
||||||||||||||
Class A |
$ 11.28 |
$ 10.86 |
$ 8.15 |
$ 8.56 |
$ 9.10 |
|||||||||
Class B |
$ 14.69 |
$ 17.44 |
$ 17.33 |
$ 22.76 |
$ 31.80 |
|||||||||
Total number of |
||||||||||||||
mutual fund shares |
973,442 |
709,767 |
713,577 |
1,226,174 |
637,186 |
|||||||||
Cost of mutual fund shares |
$ 11,227 |
$ 8,557 |
$ 8,874 |
$ 43,927 |
$ 17,214 |
The accompanying notes are an integral part of these financial statements. |
S-8 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Assets and Liabilities |
December 31, 2004 |
(Dollars in thousands, except for unit data) |
Alger |
American |
|||||||||||||
American |
American |
Funds |
American |
Fidelity® VIP |
||||||||||
MidCap |
Funds |
Growth- |
Funds |
Asset |
||||||||||
Growth |
Growth |
Income |
International |
Manager SM |
||||||||||
Assets |
||||||||||||||
Investments in mutual funds |
||||||||||||||
at fair value |
$ 43,568 |
$ 19,658 |
$ 13,451 |
$ 13,661 |
$ 20,212 |
|||||||||
Total assets |
43,568 |
19,658 |
13,451 |
13,661 |
20,212 |
|||||||||
Net assets |
$ 43,568 |
$ 19,658 |
$ 13,451 |
$ 13,661 |
$ 20,212 |
|||||||||
Number of units outstanding: |
||||||||||||||
Class A |
498,303.381 |
496,591.694 |
355,923.134 |
352,102.991 |
- |
|||||||||
Class B |
1,044,056.003 |
864,258.302 |
590,821.317 |
475,856.494 |
1,066,615.778 |
|||||||||
Value per unit: |
||||||||||||||
Class A |
$ 14.77 |
$ 14.56 |
$ 14.32 |
$ 16.62 |
$ - |
|||||||||
Class B |
$ 34.68 |
$ 14.38 |
$ 14.14 |
$ 16.41 |
$ 18.95 |
|||||||||
Total number of |
||||||||||||||
mutual fund shares |
2,094,606 |
384,705 |
367,113 |
865,152 |
1,361,102 |
|||||||||
Cost of mutual fund shares |
$ 32,990 |
$ 17,882 |
$ 12,582 |
$ 12,072 |
$ 17,998 |
The accompanying notes are an integral part of these financial statements. |
S-9 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Assets and Liabilities |
December 31, 2004 |
(Dollars in thousands, except for unit data) |
Fidelity® VIP |
||||||||||||||
Asset |
Fidelity® VIP |
Fidelity® VIP |
Fidelity® VIP |
Fidelity® VIP |
||||||||||
Manager SM SC |
Growth |
Growth SC |
Overseas |
Overseas SC |
||||||||||
Assets |
||||||||||||||
Investments in mutual funds |
||||||||||||||
at fair value |
$ 1,650 |
$ 49,347 |
$ 2,789 |
$ 40,032 |
$ 3,069 |
|||||||||
Total assets |
1,650 |
49,347 |
2,789 |
40,032 |
3,069 |
|||||||||
Net assets |
$ 1,650 |
$ 49,347 |
$ 2,789 |
$ 40,032 |
$ 3,069 |
|||||||||
Number of units outstanding: |
||||||||||||||
Class A |
147,177.353 |
99,105.005 |
341,358.286 |
98,205.715 |
310,929.035 |
|||||||||
Class B |
- |
2,062,867.727 |
- |
2,397,849.745 |
- |
|||||||||
Value per unit: |
||||||||||||||
Class A |
$ 11.21 |
$ 8.57 |
$ 8.17 |
$ 10.62 |
$ 9.87 |
|||||||||
Class B |
$ - |
$ 23.51 |
$ - |
$ 16.26 |
$ - |
|||||||||
Total number of |
||||||||||||||
mutual fund shares |
111,855 |
1,541,623 |
87,481 |
2,284,930 |
175,967 |
|||||||||
Cost of mutual fund shares |
$ 1,534 |
$ 43,495 |
$ 2,539 |
$ 31,833 |
$ 2,594 |
The accompanying notes are an integral part of these financial statements. |
S-10 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Assets and Liabilities |
December 31, 2004 |
(Dollars in thousands, except for unit data) |
ING |
||||||||||||||
JPMorgan |
||||||||||||||
ING VP |
ING Liquid |
Small Cap |
ING |
ING Legg |
||||||||||
Bond |
Assets |
Equity |
Stock Index |
Mason Value |
||||||||||
Assets |
||||||||||||||
Investments in mutual funds |
||||||||||||||
at fair value |
$ 8,705 |
$ 58,056 |
$ 22,159 |
$ 220,550 |
$ 1,660 |
|||||||||
Total assets |
8,705 |
58,056 |
22,159 |
220,550 |
1,660 |
|||||||||
Net assets |
$ 8,705 |
$ 58,056 |
$ 22,159 |
$ 220,550 |
$ 1,660 |
|||||||||
Number of units outstanding: |
||||||||||||||
Class A |
388,790.184 |
- |
87,793.174 |
2,509,900.604 |
18,800.271 |
|||||||||
Class B |
338,249.349 |
5,782,514.685 |
1,753,758.371 |
17,528,694.464 |
127,192.552 |
|||||||||
Value per unit: |
||||||||||||||
Class A |
$ 12.09 |
$ - |
$ 12.09 |
$ 11.05 |
$ 11.42 |
|||||||||
Class B |
$ 11.84 |
$ 10.04 |
$ 12.03 |
$ 11.00 |
$ 11.36 |
|||||||||
Total number of |
||||||||||||||
mutual fund shares |
662,507 |
58,056,447 |
1,654,902 |
20,233,949 |
165,464 |
|||||||||
Cost of mutual fund shares |
$ 9,134 |
$ 58,056 |
$ 19,181 |
$ 207,642 |
$ 1,480 |
The accompanying notes are an integral part of these financial statements. |
S-11 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Assets and Liabilities |
December 31, 2004 |
(Dollars in thousands, except for unit data) |
ING |
||||||||||||||
Van Kampen |
ING Limited |
|||||||||||||
ING Mercury |
Equity |
ING Hard |
Maturity |
ING Liquid |
||||||||||
Focus Value |
Growth |
Assets |
Bond |
Assets SC |
||||||||||
Assets |
||||||||||||||
Investments in mutual funds |
||||||||||||||
at fair value |
$ 27,830 |
$ 4,704 |
$ 1,428 |
$ 1,365 |
$ 20,814 |
|||||||||
Total assets |
27,830 |
4,704 |
1,428 |
1,365 |
20,814 |
|||||||||
Net assets |
$ 27,830 |
$ 4,704 |
$ 1,428 |
$ 1,365 |
$ 20,814 |
|||||||||
Number of units outstanding: |
||||||||||||||
Class A |
143,789.170 |
157,400.957 |
62,639.667 |
102,922.945 |
1,794,351.088 |
|||||||||
Class B |
2,387,885.540 |
282,318.305 |
33,736.187 |
- |
- |
|||||||||
Value per unit: |
||||||||||||||
Class A |
$ 11.04 |
$ 10.73 |
$ 13.99 |
$ 13.26 |
$ 11.60 |
|||||||||
Class B |
$ 10.99 |
$ 10.68 |
$ 16.36 |
$ - |
$ - |
|||||||||
Total number of |
||||||||||||||
mutual fund shares |
2,378,658 |
455,821 |
90,740 |
122,951 |
20,814,473 |
|||||||||
Cost of mutual fund shares |
$ 27,304 |
$ 4,469 |
$ 1,344 |
$ 1,438 |
$ 20,814 |
The accompanying notes are an integral part of these financial statements. |
S-12 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Assets and Liabilities |
December 31, 2004 |
(Dollars in thousands, except for unit data) |
ING MFS |
ING MFS |
ING T. Rowe |
ING T. Rowe |
|||||||||||
ING Marsico |
Mid Cap |
Total |
Price Capital |
Price Equity |
||||||||||
Growth |
Growth |
Return |
Appreciation |
Income |
||||||||||
Assets |
||||||||||||||
Investments in mutual funds |
||||||||||||||
at fair value |
$ 3,205 |
$ 4,257 |
$ 3,023 |
$ 33,001 |
$ 10,480 |
|||||||||
Total assets |
3,205 |
4,257 |
3,023 |
33,001 |
10,480 |
|||||||||
Net assets |
$ 3,205 |
$ 4,257 |
$ 3,023 |
$ 33,001 |
$ 10,480 |
|||||||||
Number of units outstanding: |
||||||||||||||
Class A |
153,024.208 |
173,660.454 |
108,737.835 |
674,505.591 |
178,708.165 |
|||||||||
Class B |
130,313.357 |
307,842.122 |
113,779.422 |
1,467,233.925 |
556,587.238 |
|||||||||
Value per unit: |
||||||||||||||
Class A |
$ 8.76 |
$ 10.74 |
$ 14.41 |
$ 15.71 |
$ 13.48 |
|||||||||
Class B |
$ 14.31 |
$ 7.77 |
$ 12.80 |
$ 15.27 |
$ 14.50 |
|||||||||
Total number of |
||||||||||||||
mutual fund shares |
219,992 |
364,473 |
160,728 |
1,345,887 |
761,592 |
|||||||||
Cost of mutual fund shares |
$ 2,860 |
$ 3,763 |
$ 2,827 |
$ 26,246 |
$ 9,453 |
The accompanying notes are an integral part of these financial statements. |
S-13 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Assets and Liabilities |
December 31, 2004 |
(Dollars in thousands, except for unit data) |
ING |
ING Salomon |
|||||||||||||
JPMorgan |
ING PIMCO |
Brothers |
ING Salomon |
ING |
||||||||||
Mid Cap |
Total |
Aggressive |
Brothers |
Van Kampen |
||||||||||
Value |
Return |
Growth |
Investors |
Comstock |
||||||||||
Assets |
||||||||||||||
Investments in mutual funds |
||||||||||||||
at fair value |
$ 6,176 |
$ 6,250 |
$ 226 |
$ 942 |
$ 8,237 |
|||||||||
Total assets |
6,176 |
6,250 |
226 |
942 |
8,237 |
|||||||||
Net assets |
$ 6,176 |
$ 6,250 |
$ 226 |
$ 942 |
$ 8,237 |
|||||||||
Number of units outstanding: |
||||||||||||||
Class A |
148,093.931 |
163,694.672 |
11,603.805 |
6,901.560 |
294,439.162 |
|||||||||
Class B |
254,404.705 |
423,883.343 |
4,503.096 |
59,113.739 |
358,377.198 |
|||||||||
Value per unit: |
||||||||||||||
Class A |
$ 15.47 |
$ 10.73 |
$ 14.08 |
$ 14.23 |
$ 12.76 |
|||||||||
Class B |
$ 15.27 |
$ 10.60 |
$ 13.90 |
$ 14.25 |
$ 12.50 |
|||||||||
Total number of |
||||||||||||||
mutual fund shares |
443,343 |
568,146 |
5,656 |
81,910 |
668,026 |
|||||||||
Cost of mutual fund shares |
$ 5,712 |
$ 6,125 |
$ 206 |
$ 903 |
$ 6,985 |
The accompanying notes are an integral part of these financial statements. |
S-14 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Assets and Liabilities |
December 31, 2004 |
(Dollars in thousands, except for unit data) |
ING Van |
ING VP |
ING VP |
ING VP |
|||||||||||
Kampen |
Strategic |
Strategic |
Strategic |
ING VP Index |
||||||||||
Equity and |
Allocation |
Allocation |
Allocation |
Plus |
||||||||||
Income |
Balanced |
Growth |
Income |
Large Cap |
||||||||||
Assets |
||||||||||||||
Investments in mutual funds |
||||||||||||||
at fair value |
$ 877 |
$ 31 |
$ 42 |
$ 52 |
$ 5,418 |
|||||||||
Total assets |
877 |
31 |
42 |
52 |
5,418 |
|||||||||
Net assets |
$ 877 |
$ 31 |
$ 42 |
$ 52 |
$ 5,418 |
|||||||||
Number of units outstanding: |
||||||||||||||
Class A |
55,606.410 |
2,194.061 |
169.752 |
1.530 |
223,147.170 |
|||||||||
Class B |
24,219.074 |
685.448 |
3,649.137 |
4,941.393 |
268,270.516 |
|||||||||
Value per unit: |
||||||||||||||
Class A |
$ 11.06 |
$ 10.77 |
$ 11.00 |
$ 10.50 |
$ 11.15 |
|||||||||
Class B |
$ 10.83 |
$ 10.75 |
$ 10.98 |
$ 10.48 |
$ 10.92 |
|||||||||
Total number of |
||||||||||||||
mutual fund shares |
26,219 |
2,229 |
2,841 |
3,973 |
365,560 |
|||||||||
Cost of mutual fund shares |
$ 815 |
$ 31 |
$ 42 |
$ 51 |
$ 4,584 |
The accompanying notes are an integral part of these financial statements. |
S-15 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Assets and Liabilities |
December 31, 2004 |
(Dollars in thousands, except for unit data) |
ING VP Index |
ING VP Index |
ING VP |
ING VP |
|||||||||||
Plus |
Plus |
ING VP |
MidCap |
SmallCap |
||||||||||
Mid Cap |
Small Cap |
MagnaCap |
Opportunities |
Opportunities |
||||||||||
Assets |
||||||||||||||
Investments in mutual funds |
||||||||||||||
at fair value |
$ 13,569 |
$ 6,535 |
$ 1,851 |
$ 2,482 |
$ 3,678 |
|||||||||
Total assets |
13,569 |
6,535 |
1,851 |
2,482 |
3,678 |
|||||||||
Net assets |
$ 13,569 |
$ 6,535 |
$ 1,851 |
$ 2,482 |
$ 3,678 |
|||||||||
Number of units outstanding: |
||||||||||||||
Class A |
619,068.076 |
160,414.689 |
44,746.782 |
144,466.903 |
148,639.772 |
|||||||||
Class B |
447,587.229 |
324,293.487 |
130,114.970 |
97,394.826 |
297,928.041 |
|||||||||
Value per unit: |
||||||||||||||
Class A |
$ 12.83 |
$ 13.67 |
$ 10.81 |
$ 10.38 |
$ 8.39 |
|||||||||
Class B |
$ 12.57 |
$ 13.39 |
$ 10.51 |
$ 10.09 |
$ 8.16 |
|||||||||
Total number of |
||||||||||||||
mutual fund shares |
747,181 |
398,728 |
195,071 |
361,848 |
226,210 |
|||||||||
Cost of mutual fund shares |
$ 11,094 |
$ 5,352 |
$ 1,567 |
$ 2,164 |
$ 3,365 |
The accompanying notes are an integral part of these financial statements. |
S-16 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Assets and Liabilities |
December 31, 2004 |
(Dollars in thousands, except for unit data) |
Janus Aspen |
Janus Aspen |
Janus Aspen |
Brandes |
Business |
||||||||||
International |
Mid Cap |
Worldwide |
International |
Opportunity |
||||||||||
Growth |
Growth |
Growth |
Equity |
Value |
||||||||||
Assets |
||||||||||||||
Investments in mutual funds |
||||||||||||||
at fair value |
$ 7,268 |
$ 2,988 |
$ 3,449 |
$ 11,581 |
$ 1,943 |
|||||||||
Total assets |
7,268 |
2,988 |
3,449 |
11,581 |
1,943 |
|||||||||
Net assets |
$ 7,268 |
$ 2,988 |
$ 3,449 |
$ 11,581 |
$ 1,943 |
|||||||||
Number of units outstanding: |
||||||||||||||
Class A |
346,980.895 |
112,206.223 |
178,059.417 |
32,043.926 |
30,783.268 |
|||||||||
Class B |
590,515.700 |
521,329.159 |
366,289.584 |
773,484.925 |
131,949.358 |
|||||||||
Value per unit: |
||||||||||||||
Class A |
$ 7.91 |
$ 4.84 |
$ 6.47 |
$ 14.77 |
$ 12.14 |
|||||||||
Class B |
$ 7.66 |
$ 4.69 |
$ 6.27 |
$ 14.36 |
$ 11.89 |
|||||||||
Total number of |
||||||||||||||
mutual fund shares |
269,784 |
117,828 |
129,552 |
681,208 |
158,838 |
|||||||||
Cost of mutual fund shares |
$ 6,128 |
$ 2,258 |
$ 2,959 |
$ 8,465 |
$ 1,566 |
The accompanying notes are an integral part of these financial statements. |
S-17 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Assets and Liabilities |
December 31, 2004 |
(Dollars in thousands, except for unit data) |
Neuberger |
||||||||||||||
Frontier |
Neuberger |
Berman AMT |
Pioneer |
|||||||||||
Capital |
Turner |
Berman AMT |
Limited |
Mid-Cap |
||||||||||
Appreciation |
Core Growth |
Growth |
Maturity Bond |
Value VCT |
||||||||||
Assets |
||||||||||||||
Investments in mutual funds |
||||||||||||||
at fair value |
$ 6,826 |
$ 2,652 |
$ 13,491 |
$ 27,815 |
$ 16,219 |
|||||||||
Total assets |
6,826 |
2,652 |
13,491 |
27,815 |
16,219 |
|||||||||
Net assets |
$ 6,826 |
$ 2,652 |
$ 13,491 |
$ 27,815 |
$ 16,219 |
|||||||||
Number of units outstanding: |
||||||||||||||
Class A |
21,248.505 |
26,813.300 |
85,155.583 |
404,286.440 |
206,751.592 |
|||||||||
Class B |
499,606.417 |
232,217.092 |
676,675.595 |
1,511,830.195 |
949,938.140 |
|||||||||
Value per unit: |
||||||||||||||
Class A |
$ 13.47 |
$ 10.50 |
$ 8.96 |
$ 11.51 |
$ 14.26 |
|||||||||
Class B |
$ 13.09 |
$ 10.21 |
$ 18.81 |
$ 15.32 |
$ 13.97 |
|||||||||
Total number of |
||||||||||||||
mutual fund shares |
316,608 |
181,304 |
1,110,392 |
2,169,624 |
657,435 |
|||||||||
Cost of mutual fund shares |
$ 5,434 |
$ 2,338 |
$ 10,310 |
$ 28,901 |
$ 13,875 |
The accompanying notes are an integral part of these financial statements. |
S-18 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Assets and Liabilities |
December 31, 2004 |
(Dollars in thousands, except for unit data) |
Pioneer |
Putnam VT |
Putnam VT |
Putnam VT |
|||||||||||
Small Cap |
Growth and |
New |
Small Cap |
Putnam VT |
||||||||||
Value VCT |
Income |
Opportunities |
Value |
Voyager |
||||||||||
Assets |
||||||||||||||
Investments in mutual funds |
||||||||||||||
at fair value |
$ 5,468 |
$ 7,148 |
$ 3,195 |
$ 20,927 |
$ 1,574 |
|||||||||
Total assets |
5,468 |
7,148 |
3,195 |
20,927 |
1,574 |
|||||||||
Net assets |
$ 5,468 |
$ 7,148 |
$ 3,195 |
$ 20,927 |
$ 1,574 |
|||||||||
Number of units outstanding: |
||||||||||||||
Class A |
132,873.165 |
203,842.120 |
29,401.087 |
332,769.028 |
66,324.701 |
|||||||||
Class B |
294,991.832 |
438,895.231 |
306,715.339 |
853,539.892 |
107,348.295 |
|||||||||
Value per unit: |
||||||||||||||
Class A |
$ 12.96 |
$ 11.34 |
$ 9.76 |
$ 18.00 |
$ 9.22 |
|||||||||
Class B |
$ 12.70 |
$ 11.02 |
$ 9.48 |
$ 17.05 |
$ 8.97 |
|||||||||
Total number of |
||||||||||||||
mutual fund shares |
364,077 |
280,983 |
190,156 |
918,244 |
57,883 |
|||||||||
Cost of mutual fund shares |
$ 4,571 |
$ 5,783 |
$ 2,815 |
$ 14,780 |
$ 1,378 |
The accompanying notes are an integral part of these financial statements. |
S-19 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Assets and Liabilities |
December 31, 2004 |
(Dollars in thousands, except for unit data) |
Van Eck |
||||||||||||
Van Eck |
Worldwide |
Van Eck |
Van Eck |
|||||||||
Worldwide |
Emerging |
Worldwide |
Worldwide |
|||||||||
Bond |
Markets |
Hard Assets |
Real Estate |
|||||||||
Assets |
||||||||||||
Investments in mutual funds |
||||||||||||
at fair value |
$ 5,248 |
$ 14,257 |
$ 8,359 |
$ 11,291 |
||||||||
Total assets |
5,248 |
14,257 |
8,359 |
11,291 |
||||||||
Net assets |
$ 5,248 |
$ 14,257 |
$ 8,359 |
$ 11,291 |
||||||||
Number of units outstanding: |
||||||||||||
Class A |
64,697.451 |
199,175.055 |
63,322.299 |
144,058.823 |
||||||||
Class B |
290,319.061 |
795,042.041 |
451,159.405 |
469,901.348 |
||||||||
Value per unit: |
||||||||||||
Class A |
$ 14.93 |
$ 15.30 |
$ 15.58 |
$ 20.22 |
||||||||
Class B |
$ 14.75 |
$ 14.10 |
$ 16.34 |
$ 17.83 |
||||||||
Total number of |
||||||||||||
mutual fund shares |
393,709 |
937,375 |
455,256 |
636,125 |
||||||||
Cost of mutual fund shares |
$ 4,915 |
$ 10,481 |
$ 6,918 |
$ 8,251 |
The accompanying notes are an integral part of these financial statements. |
S-20 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
AIM V.I. |
AIM V.I. |
AIM V.I. |
||||||||||||
Capital |
AIM V.I. |
Government |
Health |
AIM V.I. |
||||||||||
Appreciation |
Core Stock |
Securities |
Sciences |
High Yield |
||||||||||
Net investment income (loss) |
||||||||||||||
Income: |
||||||||||||||
Dividends from mutual funds |
$ - |
$ 199 |
$ 894 |
$ - |
$ 801 |
|||||||||
Total investment income (loss) |
- |
199 |
894 |
- |
801 |
|||||||||
Expenses: |
||||||||||||||
Mortality,expenserisk |
||||||||||||||
andothercharges |
74 |
163 |
179 |
6 |
113 |
|||||||||
Total expenses |
74 |
163 |
179 |
6 |
113 |
|||||||||
Net investment income (loss) |
(74) |
36 |
715 |
(6) |
688 |
|||||||||
Realized and unrealized gain (loss) |
||||||||||||||
oninvestments |
||||||||||||||
Net realized gain (loss) on investments |
(56) |
(664) |
480 |
30 |
14 |
|||||||||
Capital gains distributions |
- |
- |
- |
- |
- |
|||||||||
Net unrealized appreciation (depreciation) |
||||||||||||||
oninvestments |
782 |
1,347 |
(677) |
(7) |
1,530 |
|||||||||
Net realized and unrealized gain (loss) on |
||||||||||||||
investments |
726 |
683 |
(197) |
23 |
1,544 |
|||||||||
Net increase (decrease) in net assets |
||||||||||||||
resulting from operations |
$ 652 |
$ 719 |
$ 518 |
$ 17 |
$ 2,232 |
The accompanying notes are an integral part of these financial statements. |
S-21 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
AIM V.I. |
Alger |
|||||||||||||
Small |
Alger |
American |
||||||||||||
Company |
AIM V.I. |
AIM V.I. |
American |
Leveraged |
||||||||||
Growth |
Total Return |
Utilities |
Growth |
AllCap |
||||||||||
Net investment income (loss) |
||||||||||||||
Income: |
||||||||||||||
Dividends from mutual funds |
$ - |
$ 155 |
$ 203 |
$ - |
$ - |
|||||||||
Total investment income (loss) |
- |
155 |
203 |
- |
- |
|||||||||
Expenses: |
||||||||||||||
Mortality,expenserisk |
||||||||||||||
andothercharges |
90 |
69 |
64 |
301 |
126 |
|||||||||
Total expenses |
90 |
69 |
64 |
301 |
126 |
|||||||||
Net investment income (loss) |
(90) |
86 |
139 |
(301) |
(126) |
|||||||||
Realized and unrealized gain (loss) |
||||||||||||||
oninvestments |
||||||||||||||
Net realized gain (loss) on investments |
398 |
(5) |
731 |
(5,514) |
(125) |
|||||||||
Capital gains distributions |
- |
- |
- |
- |
- |
|||||||||
Net unrealized appreciation (depreciation) |
||||||||||||||
oninvestments |
1,492 |
149 |
1,190 |
7,609 |
1,676 |
|||||||||
Net realized and unrealized gain (loss) on |
||||||||||||||
investments |
1,890 |
144 |
1,921 |
2,095 |
1,551 |
|||||||||
Net increase (decrease) in net assets |
||||||||||||||
resulting from operations |
$ 1,800 |
$ 230 |
$ 2,060 |
$ 1,794 |
$ 1,425 |
The accompanying notes are an integral part of these financial statements. |
S-22 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
Alger |
Alger |
American |
||||||||||||
American |
American |
American |
Funds |
American |
||||||||||
MidCap |
Small |
Funds |
Growth- |
Funds |
||||||||||
Growth |
Capitalization |
Growth |
Income |
International |
||||||||||
Net investment income (loss) |
||||||||||||||
Income: |
||||||||||||||
Dividends from mutual funds |
$ - |
$ - |
$ 28 |
$ 101 |
$ 153 |
|||||||||
Total investment income (loss) |
- |
- |
28 |
101 |
153 |
|||||||||
Expenses: |
||||||||||||||
Mortality,expenserisk |
||||||||||||||
andothercharges |
277 |
59 |
56 |
37 |
34 |
|||||||||
Total expenses |
277 |
59 |
56 |
37 |
34 |
|||||||||
Net investment income (loss) |
(277) |
(59) |
(28) |
64 |
119 |
|||||||||
Realized and unrealized gain (loss) |
||||||||||||||
oninvestments |
||||||||||||||
Net realized gain (loss) on investments |
1,235 |
6,212 |
78 |
191 |
161 |
|||||||||
Capital gains distributions |
- |
- |
- |
- |
- |
|||||||||
Net unrealized appreciation (depreciation) |
||||||||||||||
oninvestments |
4,093 |
(4,835) |
1,527 |
644 |
1,376 |
|||||||||
Net realized and unrealized gain (loss) on |
||||||||||||||
investments |
5,328 |
1,377 |
1,605 |
835 |
1,537 |
|||||||||
Net increase (decrease) in net assets |
||||||||||||||
resulting from operations |
$ 5,051 |
$ 1,318 |
$ 1,577 |
$ 899 |
$ 1,656 |
The accompanying notes are an integral part of these financial statements. |
S-23 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
Fidelity® VIP |
Fidelity® VIP |
|||||||||||||
Asset |
Asset |
Fidelity® VIP |
Fidelity® VIP |
Fidelity® VIP |
||||||||||
Manager SM |
Manager SM SC |
Growth |
Growth SC |
Index 500 |
||||||||||
Net investment income (loss) |
||||||||||||||
Income: |
||||||||||||||
Dividends from mutual funds |
$ 545 |
$ 34 |
$ 135 |
$ 4 |
$ 2,602 |
|||||||||
Total investment income (loss) |
545 |
34 |
135 |
4 |
2,602 |
|||||||||
Expenses: |
||||||||||||||
Mortality,expenserisk |
||||||||||||||
andothercharges |
153 |
- |
375 |
- |
655 |
|||||||||
Total expenses |
153 |
- |
375 |
- |
655 |
|||||||||
Net investment income (loss) |
392 |
34 |
(240) |
4 |
1,947 |
|||||||||
Realized and unrealized gain (loss) |
||||||||||||||
oninvestments |
||||||||||||||
Net realized gain (loss) on investments |
65 |
15 |
(1,096) |
218 |
(1,309) |
|||||||||
Capital gains distributions |
- |
- |
- |
- |
- |
|||||||||
Net unrealized appreciation (depreciation) |
||||||||||||||
oninvestments |
464 |
27 |
2,415 |
(115) |
3,944 |
|||||||||
Net realized and unrealized gain (loss) on |
||||||||||||||
investments |
529 |
42 |
1,319 |
103 |
2,635 |
|||||||||
Net increase (decrease) in net assets |
||||||||||||||
resulting from operations |
$ 921 |
$ 76 |
$ 1,079 |
$ 107 |
$ 4,582 |
The accompanying notes are an integral part of these financial statements. |
S-24 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
Fidelity® VIP |
||||||||||||||
Money |
Fidelity® VIP |
Fidelity® VIP |
ING VP |
ING Liquid |
||||||||||
Market |
Overseas |
Overseas SC |
Bond |
Assets |
||||||||||
Net investment income (loss) |
||||||||||||||
Income: |
||||||||||||||
Dividends from mutual funds |
$ 348 |
$ 446 |
$ 19 |
$ 599 |
$ 520 |
|||||||||
Total investment income (loss) |
348 |
446 |
19 |
599 |
520 |
|||||||||
Expenses: |
||||||||||||||
Mortality,expenserisk |
||||||||||||||
andothercharges |
279 |
273 |
- |
29 |
279 |
|||||||||
Total expenses |
279 |
273 |
- |
29 |
279 |
|||||||||
Net investment income (loss) |
69 |
173 |
19 |
570 |
241 |
|||||||||
Realized and unrealized gain (loss) |
||||||||||||||
oninvestments |
||||||||||||||
Net realized gain (loss) on investments |
1 |
2,867 |
166 |
(39) |
- |
|||||||||
Capital gains distributions |
- |
- |
- |
297 |
- |
|||||||||
Net unrealized appreciation (depreciation) |
||||||||||||||
oninvestments |
(1) |
1,404 |
158 |
(540) |
- |
|||||||||
Net realized and unrealized gain (loss) on |
||||||||||||||
investments |
- |
4,271 |
324 |
(282) |
- |
|||||||||
Net increase (decrease) in net assets |
||||||||||||||
resulting from operations |
$ 69 |
$ 4,444 |
$ 343 |
$ 288 |
$ 241 |
The accompanying notes are an integral part of these financial statements. |
S-25 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
ING |
ING |
|||||||||||||
JPMorgan |
Van Kampen |
|||||||||||||
Small Cap |
ING |
ING Legg |
IMG Mercury |
Equity |
||||||||||
Equity |
Stock Index |
Mason Value |
Focus Value |
Growth |
||||||||||
Net investment income (loss) |
||||||||||||||
Income: |
||||||||||||||
Dividends from mutual funds |
$ - |
$ 2,368 |
$ 4 |
$ 98 |
$ - |
|||||||||
Total investment income (loss) |
- |
2,368 |
4 |
98 |
- |
|||||||||
Expenses: |
||||||||||||||
Mortality,expenserisk |
||||||||||||||
andothercharges |
73 |
705 |
4 |
109 |
11 |
|||||||||
Total expenses |
73 |
705 |
4 |
109 |
11 |
|||||||||
Net investment income (loss) |
(73) |
1,663 |
- |
(11) |
(11) |
|||||||||
Realized and unrealized gain (loss) |
||||||||||||||
oninvestments |
||||||||||||||
Net realized gain (loss) on investments |
93 |
(20) |
1 |
5 |
(11) |
|||||||||
Capital gains distributions |
23 |
617 |
- |
1,193 |
22 |
|||||||||
Net unrealized appreciation (depreciation) |
||||||||||||||
oninvestments |
2,978 |
12,908 |
180 |
526 |
235 |
|||||||||
Net realized and unrealized gain (loss) on |
||||||||||||||
investments |
3,094 |
13,505 |
181 |
1,724 |
246 |
|||||||||
Net increase (decrease) in net assets |
||||||||||||||
resulting from operations |
$ 3,021 |
$ 15,168 |
$ 181 |
$ 1,713 |
$ 235 |
The accompanying notes are an integral part of these financial statements. |
S-26 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
ING Limited |
ING MFS |
|||||||||||||
ING Hard |
Maturity |
ING Liquid |
ING Marsico |
Mid Cap |
||||||||||
Assets |
Bond |
Assets SC |
Growth |
Growth |
||||||||||
Net investment income (loss) |
||||||||||||||
Income: |
||||||||||||||
Dividends from mutual funds |
$ 13 |
$ 71 |
$ 208 |
$ - |
$ - |
|||||||||
Total investment income (loss) |
13 |
71 |
208 |
- |
- |
|||||||||
Expenses: |
||||||||||||||
Mortality,expenserisk |
||||||||||||||
andothercharges |
3 |
- |
- |
13 |
15 |
|||||||||
Total expenses |
3 |
- |
- |
13 |
15 |
|||||||||
Net investment income (loss) |
10 |
71 |
208 |
(13) |
(15) |
|||||||||
Realized and unrealized gain (loss) |
||||||||||||||
oninvestments |
||||||||||||||
Net realized gain (loss) on investments |
(28) |
3 |
- |
87 |
327 |
|||||||||
Capital gains distributions |
- |
11 |
- |
- |
- |
|||||||||
Net unrealized appreciation (depreciation) |
||||||||||||||
oninvestments |
78 |
(76) |
- |
294 |
179 |
|||||||||
Net realized and unrealized gain (loss) on |
||||||||||||||
investments |
50 |
(62) |
- |
381 |
506 |
|||||||||
Net increase (decrease) in net assets |
||||||||||||||
resulting from operations |
$ 60 |
$ 9 |
$ 208 |
$ 368 |
$ 491 |
The accompanying notes are an integral part of these financial statements. |
S-27 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
ING |
||||||||||||||
ING MFS |
ING |
ING T. Rowe |
ING T. Rowe |
JPMorgan |
||||||||||
Total |
Oppenheimer |
Price Capital |
Price Equity |
Mid Cap |
||||||||||
Return |
Main Street |
Appreciation |
Income |
Value |
||||||||||
Net investment income (loss) |
||||||||||||||
Income: |
||||||||||||||
Dividends from mutual funds |
$ 54 |
$ - |
$ 364 |
$ 96 |
$ 17 |
|||||||||
Total investment income (loss) |
54 |
- |
364 |
96 |
17 |
|||||||||
Expenses: |
||||||||||||||
Mortality,expenserisk |
||||||||||||||
andothercharges |
7 |
- |
140 |
29 |
12 |
|||||||||
Total expenses |
7 |
- |
140 |
29 |
12 |
|||||||||
Net investment income (loss) |
47 |
- |
224 |
67 |
5 |
|||||||||
Realized and unrealized gain (loss) |
||||||||||||||
oninvestments |
||||||||||||||
Net realized gain (loss) on investments |
86 |
- |
527 |
57 |
68 |
|||||||||
Capital gains distributions |
- |
- |
210 |
50 |
178 |
|||||||||
Net unrealized appreciation (depreciation) |
||||||||||||||
oninvestments |
109 |
(1) |
3,283 |
785 |
404 |
|||||||||
Net realized and unrealized gain (loss) on |
||||||||||||||
investments |
195 |
(1) |
4,020 |
892 |
650 |
|||||||||
Net increase (decrease) in net assets |
||||||||||||||
resulting from operations |
$ 242 |
$ (1) |
$ 4,244 |
$ 959 |
$ 655 |
The accompanying notes are an integral part of these financial statements. |
S-28 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
ING Salomon |
ING Van |
|||||||||||||
ING PIMCO |
Brothers |
ING Salomon |
ING |
Kampen |
||||||||||
Total |
Aggressive |
Brothers |
Van Kampen |
Equity and |
||||||||||
Return |
Growth |
Investors |
Comstock |
Income |
||||||||||
Net investment income (loss) |
||||||||||||||
Income: |
||||||||||||||
Dividends from mutual funds |
$ - |
$ - |
$ 7 |
$ - |
$ 4 |
|||||||||
Total investment income (loss) |
- |
- |
7 |
- |
4 |
|||||||||
Expenses: |
||||||||||||||
Mortality,expenserisk |
||||||||||||||
andothercharges |
47 |
1 |
5 |
27 |
2 |
|||||||||
Total expenses |
47 |
1 |
5 |
27 |
2 |
|||||||||
Net investment income (loss) |
(47) |
(1) |
2 |
(27) |
2 |
|||||||||
Realized and unrealized gain (loss) |
||||||||||||||
oninvestments |
||||||||||||||
Net realized gain (loss) on investments |
95 |
13 |
21 |
317 |
4 |
|||||||||
Capital gains distributions |
88 |
- |
- |
32 |
- |
|||||||||
Net unrealized appreciation (depreciation) |
||||||||||||||
oninvestments |
168 |
13 |
25 |
732 |
49 |
|||||||||
Net realized and unrealized gain (loss) on |
||||||||||||||
investments |
351 |
26 |
46 |
1,081 |
53 |
|||||||||
Net increase (decrease) in net assets |
||||||||||||||
resulting from operations |
$ 304 |
$ 25 |
$ 48 |
$ 1,054 |
$ 55 |
The accompanying notes are an integral part of these financial statements. |
S-29 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
ING VP |
ING VP |
ING VP |
||||||||||||
Strategic |
Strategic |
Strategic |
ING VP Index |
ING VP Index |
||||||||||
Allocation |
Allocation |
Allocation |
Plus |
Plus |
||||||||||
Balanced |
Growth |
Income |
Large Cap |
Mid Cap |
||||||||||
Net investment income (loss) |
||||||||||||||
Income: |
||||||||||||||
Dividends from mutual funds |
$ - |
$ - |
$ - |
$ 48 |
$ 47 |
|||||||||
Total investment income (loss) |
- |
- |
- |
48 |
47 |
|||||||||
Expenses: |
||||||||||||||
Mortality,expenserisk |
||||||||||||||
andothercharges |
- |
- |
- |
18 |
34 |
|||||||||
Total expenses |
- |
- |
- |
18 |
34 |
|||||||||
Net investment income (loss) |
- |
- |
- |
30 |
13 |
|||||||||
Realized and unrealized gain (loss) |
||||||||||||||
oninvestments |
||||||||||||||
Net realized gain (loss) on investments |
- |
- |
- |
228 |
463 |
|||||||||
Capital gains distributions |
- |
- |
- |
- |
- |
|||||||||
Net unrealized appreciation (depreciation) |
||||||||||||||
oninvestments |
- |
- |
1 |
243 |
1,150 |
|||||||||
Net realized and unrealized gain (loss) on |
||||||||||||||
investments |
- |
- |
1 |
471 |
1,613 |
|||||||||
Net increase (decrease) in net assets |
||||||||||||||
resulting from operations |
$ - |
$ - |
$ 1 |
$ 501 |
$ 1,626 |
The accompanying notes are an integral part of these financial statements. |
S-30 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
ING VP Index |
ING VP |
ING VP |
ING VP |
|||||||||||
Plus |
Growth |
ING VP |
MidCap |
SmallCap |
||||||||||
Small Cap |
Opportunities |
MagnaCap |
Opportunities |
Opportunities |
||||||||||
Net investment income (loss) |
||||||||||||||
Income: |
||||||||||||||
Dividends from mutual funds |
$ 6 |
$ - |
$ 24 |
$ - |
$ - |
|||||||||
Total investment income (loss) |
6 |
- |
24 |
- |
- |
|||||||||
Expenses: |
||||||||||||||
Mortality,expenserisk |
||||||||||||||
andothercharges |
19 |
- |
8 |
5 |
16 |
|||||||||
Total expenses |
19 |
- |
8 |
5 |
16 |
|||||||||
Net investment income (loss) |
(13) |
- |
16 |
(5) |
(16) |
|||||||||
Realized and unrealized gain (loss) |
||||||||||||||
oninvestments |
||||||||||||||
Net realized gain (loss) on investments |
260 |
45 |
62 |
187 |
176 |
|||||||||
Capital gains distributions |
23 |
- |
- |
- |
- |
|||||||||
Net unrealized appreciation (depreciation) |
||||||||||||||
oninvestments |
607 |
(30) |
57 |
18 |
57 |
|||||||||
Net realized and unrealized gain (loss) on |
||||||||||||||
investments |
890 |
15 |
119 |
205 |
233 |
|||||||||
Net increase (decrease) in net assets |
||||||||||||||
resulting from operations |
$ 877 |
$ 15 |
$ 135 |
$ 200 |
$ 217 |
The accompanying notes are an integral part of these financial statements. |
S-31 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
INVESCO |
Janus Aspen |
Janus Aspen |
||||||||||||
VIF - High |
Janus Aspen |
International |
Mid Cap |
Janus Aspen |
||||||||||
Yield |
Growth |
Growth |
Growth |
Worldwide |
||||||||||
Net investment income (loss) |
||||||||||||||
Income: |
||||||||||||||
Dividends from mutual funds |
$ 1,883 |
$ - |
$ 56 |
$ - |
$ 31 |
|||||||||
Total investment income (loss) |
1,883 |
- |
56 |
- |
31 |
|||||||||
Expenses: |
||||||||||||||
Mortality,expenserisk |
||||||||||||||
andothercharges |
59 |
10 |
33 |
15 |
18 |
|||||||||
Total expenses |
59 |
10 |
33 |
15 |
18 |
|||||||||
Net investment income (loss) |
1,824 |
(10) |
23 |
(15) |
13 |
|||||||||
Realized and unrealized gain (loss) |
||||||||||||||
oninvestments |
||||||||||||||
Net realized gain (loss) on investments |
184 |
825 |
1,288 |
49 |
(86) |
|||||||||
Capital gains distributions |
- |
- |
- |
- |
- |
|||||||||
Net unrealized appreciation (depreciation) |
||||||||||||||
oninvestments |
(1,508) |
(754) |
(261) |
435 |
187 |
|||||||||
Net realized and unrealized gain (loss) on |
||||||||||||||
investments |
(1,324) |
71 |
1,027 |
484 |
101 |
|||||||||
Net increase (decrease) in net assets |
||||||||||||||
resulting from operations |
$ 500 |
$ 61 |
$ 1,050 |
$ 469 |
$ 114 |
The accompanying notes are an integral part of these financial statements. |
S-32 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
Brandes |
Business |
Clifton |
Frontier |
|||||||||||
International |
Opportunity |
Enhanced |
Capital |
Turner |
||||||||||
Equity |
Value |
US Equity |
Appreciation |
Core Growth |
||||||||||
Net investment income (loss) |
||||||||||||||
Income: |
||||||||||||||
Dividends from mutual funds |
$ 119 |
$ 10 |
$ - |
$ - |
$ 6 |
|||||||||
Total investment income (loss) |
119 |
10 |
- |
- |
6 |
|||||||||
Expenses: |
||||||||||||||
Mortality,expenserisk |
||||||||||||||
andothercharges |
68 |
8 |
- |
40 |
13 |
|||||||||
Total expenses |
68 |
8 |
- |
40 |
13 |
|||||||||
Net investment income (loss) |
51 |
2 |
- |
(40) |
(7) |
|||||||||
Realized and unrealized gain (loss) |
||||||||||||||
oninvestments |
||||||||||||||
Net realized gain (loss) on investments |
287 |
62 |
- |
906 |
118 |
|||||||||
Capital gains distributions |
560 |
12 |
- |
- |
- |
|||||||||
Net unrealized appreciation (depreciation) |
||||||||||||||
oninvestments |
1,187 |
185 |
- |
(423) |
133 |
|||||||||
Net realized and unrealized gain (loss) on |
||||||||||||||
investments |
2,034 |
259 |
- |
483 |
251 |
|||||||||
Net increase (decrease) in net assets |
||||||||||||||
resulting from operations |
$ 2,085 |
$ 261 |
$ - |
$ 443 |
$ 244 |
The accompanying notes are an integral part of these financial statements. |
S-33 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
Neuberger |
||||||||||||||
Neuberger |
Berman AMT |
Neuberger |
Pioneer |
Pioneer |
||||||||||
Berman AMT |
Limited |
Berman AMT |
Mid-Cap |
Small Cap |
||||||||||
Growth |
Maturity Bond |
Partners |
Value VCT |
Value VCT |
||||||||||
Net investment income (loss) |
||||||||||||||
Income: |
||||||||||||||
Dividends from mutual funds |
$ - |
$ 992 |
$ - |
$ 40 |
$ - |
|||||||||
Total investment income (loss) |
- |
992 |
- |
40 |
- |
|||||||||
Expenses: |
||||||||||||||
Mortality,expenserisk |
||||||||||||||
andothercharges |
100 |
188 |
114 |
69 |
20 |
|||||||||
Total expenses |
100 |
188 |
114 |
69 |
20 |
|||||||||
Net investment income (loss) |
(100) |
804 |
(114) |
(29) |
(20) |
|||||||||
Realized and unrealized gain (loss) |
||||||||||||||
oninvestments |
||||||||||||||
Net realized gain (loss) on investments |
(433) |
43 |
4,203 |
688 |
219 |
|||||||||
Capital gains distributions |
- |
- |
- |
106 |
- |
|||||||||
Net unrealized appreciation (depreciation) |
||||||||||||||
oninvestments |
2,567 |
(802) |
(2,662) |
1,589 |
608 |
|||||||||
Net realized and unrealized gain (loss) on |
||||||||||||||
investments |
2,134 |
(759) |
1,541 |
2,383 |
827 |
|||||||||
Net increase (decrease) in net assets |
||||||||||||||
resulting from operations |
$ 2,034 |
$ 45 |
$ 1,427 |
$ 2,354 |
$ 807 |
The accompanying notes are an integral part of these financial statements. |
S-34 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
Putnam VT |
Putnam VT |
Putnam VT |
Van Eck |
|||||||||||
Growth and |
New |
Small Cap |
Putnam VT |
Worldwide |
||||||||||
Income |
Opportunities |
Value |
Voyager |
Bond |
||||||||||
Net investment income (loss) |
||||||||||||||
Income: |
||||||||||||||
Dividends from mutual funds |
$ 83 |
$ - |
$ 61 |
$ 3 |
$ 463 |
|||||||||
Total investment income (loss) |
83 |
- |
61 |
3 |
463 |
|||||||||
Expenses: |
||||||||||||||
Mortality,expenserisk |
||||||||||||||
andothercharges |
29 |
8 |
98 |
6 |
31 |
|||||||||
Total expenses |
29 |
8 |
98 |
6 |
31 |
|||||||||
Net investment income (loss) |
54 |
(8) |
(37) |
(3) |
432 |
|||||||||
Realized and unrealized gain (loss) |
||||||||||||||
oninvestments |
||||||||||||||
Net realized gain (loss) on investments |
128 |
(12) |
1,711 |
97 |
138 |
|||||||||
Capital gains distributions |
- |
- |
- |
- |
- |
|||||||||
Net unrealized appreciation (depreciation) |
||||||||||||||
oninvestments |
454 |
261 |
2,329 |
(22) |
(197) |
|||||||||
Net realized and unrealized gain (loss) on |
||||||||||||||
investments |
582 |
249 |
4,040 |
75 |
(59) |
|||||||||
Net increase (decrease) in net assets |
||||||||||||||
resulting from operations |
$ 636 |
$ 241 |
$ 4,003 |
$ 72 |
$ 373 |
The accompanying notes are an integral part of these financial statements. |
S-35 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Operations |
For the year ended December 31, 2004 |
(Dollars in thousands) |
Van Eck |
||||||||||
Worldwide |
Van Eck |
Van Eck |
||||||||
Emerging |
Worldwide |
Worldwide |
||||||||
Markets |
Hard Assets |
Real Estate |
||||||||
Net investment income (loss) |
||||||||||
Income: |
||||||||||
Dividends from mutual funds |
$ 65 |
$ 30 |
$ 113 |
|||||||
Total investment income (loss) |
65 |
30 |
113 |
|||||||
Expenses: |
||||||||||
Mortality,expenserisk |
||||||||||
andothercharges |
70 |
44 |
48 |
|||||||
Total expenses |
70 |
44 |
48 |
|||||||
Net investment income (loss) |
(5) |
(14) |
65 |
|||||||
Realized and unrealized gain (loss) |
||||||||||
oninvestments |
||||||||||
Net realized gain (loss) on investments |
1,944 |
1,233 |
683 |
|||||||
Capital gains distributions |
- |
- |
- |
|||||||
Net unrealized appreciation (depreciation) |
||||||||||
oninvestments |
731 |
94 |
1,868 |
|||||||
Net realized and unrealized gain (loss) on |
||||||||||
investments |
2,675 |
1,327 |
2,551 |
|||||||
Net increase (decrease) in net assets |
||||||||||
resulting from operations |
$ 2,670 |
$ 1,313 |
$ 2,616 |
The accompanying notes are an integral part of these financial statements. |
S-36 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
AIM V.I. |
AIM V.I. |
AIM V.I. |
||||||||||
Capital |
AIM V.I. |
Government |
Health |
|||||||||
Appreciation |
Core Stock |
Securities |
Sciences |
|||||||||
Net assets at January 1, 2003 |
$ 8,853 |
$ 23,265 |
$ 33,988 |
$ 134 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(68) |
115 |
492 |
(2) |
||||||||
Net realized gain (loss) on investments |
(465) |
(1,400) |
857 |
10 |
||||||||
Net unrealized appreciation (depreciation) of investments |
3,013 |
6,164 |
(1,265) |
89 |
||||||||
Net increase (decrease) in net assets from operations |
2,480 |
4,879 |
84 |
97 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
1,728 |
3,661 |
5,571 |
82 |
||||||||
Administrative expenses |
(686) |
(1,564) |
(1,627) |
(25) |
||||||||
Benefit payments |
(18) |
(68) |
(74) |
- |
||||||||
Surrenders and withdrawals |
(825) |
(1,817) |
(1,682) |
(1) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
(546) |
(1,232) |
(6,466) |
345 |
||||||||
Other |
3 |
(14) |
6 |
(1) |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
(344) |
(1,034) |
(4,272) |
400 |
||||||||
Total increase (decrease) in net assets |
2,136 |
3,845 |
(4,188) |
497 |
||||||||
Net assets at December 31, 2003 |
10,989 |
27,110 |
29,800 |
631 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(74) |
36 |
715 |
(6) |
||||||||
Net realized gain (loss) on investments |
(56) |
(664) |
480 |
30 |
||||||||
Capital gains distributions |
- |
- |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
782 |
1,347 |
(677) |
(7) |
||||||||
Net increase (decrease) in net assets from operations |
652 |
719 |
518 |
17 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
1,605 |
2,715 |
3,279 |
301 |
||||||||
Administrative expenses |
(662) |
(1,288) |
(1,196) |
(60) |
||||||||
Benefit payments |
- |
(14) |
- |
- |
||||||||
Surrenders and withdrawals |
(553) |
(2,658) |
(6,262) |
(32) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
(158) |
(3,220) |
(2,084) |
398 |
||||||||
Other |
9 |
13 |
1 |
6 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
241 |
(4,452) |
(6,262) |
613 |
||||||||
Total increase (decrease) in net assets |
893 |
(3,733) |
(5,744) |
630 |
||||||||
Net assets at December 31, 2004 |
$ 11,882 |
$ 23,377 |
$ 24,056 |
$ 1,261 |
The accompanying notes are an integral part of these financial statements. |
S-37 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
AIM V.I. |
||||||||||||
Small |
||||||||||||
AIM V.I. |
Company |
AIM V.I. |
AIM V.I. |
|||||||||
High Yield |
Growth |
Total Return |
Utilities |
|||||||||
Net assets at January 1, 2003 |
$ - |
$ 12,029 |
$ 9,980 |
$ 6,946 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
- |
(88) |
181 |
42 |
||||||||
Net realized gain (loss) on investments |
- |
(1,601) |
(291) |
(1,619) |
||||||||
Net unrealized appreciation (depreciation) of investments |
- |
5,254 |
1,609 |
2,797 |
||||||||
Net increase (decrease) in net assets from operations |
- |
3,565 |
1,499 |
1,220 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
- |
1,876 |
1,240 |
971 |
||||||||
Administrative expenses |
- |
(702) |
(684) |
(450) |
||||||||
Benefit payments |
- |
(6) |
(12) |
(3) |
||||||||
Surrenders and withdrawals |
- |
(1,374) |
(1,377) |
(168) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
- |
(1,514) |
(175) |
435 |
||||||||
Other |
- |
(10) |
- |
- |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
- |
(1,730) |
(1,008) |
785 |
||||||||
Total increase (decrease) in net assets |
- |
1,835 |
491 |
2,005 |
||||||||
Net assets at December 31, 2003 |
- |
13,864 |
10,471 |
8,951 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
688 |
(90) |
86 |
139 |
||||||||
Net realized gain (loss) on investments |
14 |
398 |
(5) |
731 |
||||||||
Capital gains distributions |
- |
- |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
1,530 |
1,492 |
149 |
1,190 |
||||||||
Net increase (decrease) in net assets from operations |
2,232 |
1,800 |
230 |
2,060 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
1,534 |
1,880 |
1,130 |
905 |
||||||||
Administrative expenses |
(888) |
(658) |
(577) |
(413) |
||||||||
Benefit payments |
- |
(4) |
(1) |
- |
||||||||
Surrenders and withdrawals |
(567) |
(1,101) |
(886) |
(516) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
25,588 |
(781) |
(1,191) |
158 |
||||||||
Other |
4 |
1 |
1 |
(6) |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
25,671 |
(663) |
(1,524) |
128 |
||||||||
Total increase (decrease) in net assets |
27,903 |
1,137 |
(1,294) |
2,188 |
||||||||
Net assets at December 31, 2004 |
$ 27,903 |
$ 15,001 |
$ 9,177 |
$ 11,139 |
The accompanying notes are an integral part of these financial statements. |
S-38 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
Alger |
Alger |
Alger |
||||||||||
Alger |
American |
American |
American |
|||||||||
American |
Leveraged |
MidCap |
Small |
|||||||||
Growth |
AllCap |
Growth |
Capitalization |
|||||||||
Net assets at January 1, 2003 |
$ 33,021 |
$ 13,112 |
$ 27,448 |
$ 11,557 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(270) |
(114) |
(244) |
(121) |
||||||||
Net realized gain (loss) on investments |
(8,251) |
(803) |
(1,579) |
(928) |
||||||||
Net unrealized appreciation (depreciation) of investments |
19,787 |
5,464 |
15,543 |
6,948 |
||||||||
Net increase (decrease) in net assets from operations |
11,266 |
4,547 |
13,720 |
5,899 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
5,806 |
2,732 |
4,837 |
2,210 |
||||||||
Administrative expenses |
(2,346) |
(1,176) |
(1,926) |
(1,226) |
||||||||
Benefit payments |
(19) |
(51) |
(61) |
- |
||||||||
Surrenders and withdrawals |
(2,314) |
(1,475) |
(4,046) |
(1,842) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
(916) |
486 |
3,931 |
2,790 |
||||||||
Other |
42 |
5 |
21 |
(12) |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
253 |
521 |
2,756 |
1,920 |
||||||||
Total increase (decrease) in net assets |
11,519 |
5,068 |
16,476 |
7,819 |
||||||||
Net assets at December 31, 2003 |
44,540 |
18,180 |
43,924 |
19,376 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(301) |
(126) |
(277) |
(59) |
||||||||
Net realized gain (loss) on investments |
(5,514) |
(125) |
1,235 |
6,212 |
||||||||
Capital gains distributions |
- |
- |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
7,609 |
1,676 |
4,093 |
(4,835) |
||||||||
Net increase (decrease) in net assets from operations |
1,794 |
1,425 |
5,051 |
1,318 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
4,984 |
2,485 |
5,056 |
1,083 |
||||||||
Administrative expenses |
(2,207) |
(1,088) |
(2,032) |
(576) |
||||||||
Benefit payments |
(86) |
(1) |
(6) |
(1) |
||||||||
Surrenders and withdrawals |
(4,860) |
(898) |
(3,525) |
(609) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
(1,114) |
(747) |
(4,933) |
(20,598) |
||||||||
Other |
12 |
8 |
33 |
7 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
(3,271) |
(241) |
(5,407) |
(20,694) |
||||||||
Total increase (decrease) in net assets |
(1,477) |
1,184 |
(356) |
(19,376) |
||||||||
Net assets at December 31, 2004 |
$ 43,063 |
$ 19,364 |
$ 43,568 |
$ - |
The accompanying notes are an integral part of these financial statements. |
S-39 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
American |
||||||||||||
American |
Funds |
American |
Fidelity® VIP |
|||||||||
Funds |
Growth- |
Funds |
Asset |
|||||||||
Growth |
Income |
International |
Manager SM |
|||||||||
Net assets at January 1, 2003 |
$ - |
$ - |
$ - |
$ 21,839 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(1) |
20 |
21 |
606 |
||||||||
Net realized gain (loss) on investments |
2 |
33 |
20 |
(876) |
||||||||
Net unrealized appreciation (depreciation) of investments |
249 |
225 |
213 |
3,655 |
||||||||
Net increase (decrease) in net assets from operations |
250 |
278 |
254 |
3,385 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
384 |
590 |
450 |
2,634 |
||||||||
Administrative expenses |
(47) |
(33) |
(28) |
(1,215) |
||||||||
Benefit payments |
(1) |
- |
- |
(18) |
||||||||
Surrenders and withdrawals |
(22) |
(18) |
- |
(2,683) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
3,366 |
2,644 |
1,715 |
(2,942) |
||||||||
Other |
(1) |
2 |
21 |
3 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
3,679 |
3,185 |
2,158 |
(4,221) |
||||||||
Total increase (decrease) in net assets |
3,929 |
3,463 |
2,412 |
(836) |
||||||||
Net assets at December 31, 2003 |
3,929 |
3,463 |
2,412 |
21,003 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(28) |
64 |
119 |
392 |
||||||||
Net realized gain (loss) on investments |
78 |
191 |
161 |
65 |
||||||||
Capital gains distributions |
- |
- |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
1,527 |
644 |
1,376 |
464 |
||||||||
Net increase (decrease) in net assets from operations |
1,577 |
899 |
1,656 |
921 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
3,477 |
2,564 |
2,693 |
2,317 |
||||||||
Administrative expenses |
(569) |
(396) |
(345) |
(1,046) |
||||||||
Benefit payments |
- |
- |
- |
(7) |
||||||||
Surrenders and withdrawals |
(254) |
(164) |
(139) |
(2,420) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
11,494 |
7,076 |
7,383 |
(557) |
||||||||
Other |
4 |
9 |
1 |
1 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
14,152 |
9,089 |
9,593 |
(1,712) |
||||||||
Total increase (decrease) in net assets |
15,729 |
9,988 |
11,249 |
(791) |
||||||||
Net assets at December 31, 2004 |
$ 19,658 |
$ 13,451 |
$ 13,661 |
$ 20,212 |
The accompanying notes are an integral part of these financial statements. |
S-40 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
Fidelity® VIP |
||||||||||||
Asset |
Fidelity® VIP |
Fidelity® VIP |
Fidelity® VIP |
|||||||||
Manager SM SC |
Growth |
Growth SC |
Index 500 |
|||||||||
Net assets at January 1, 2003 |
$ 588 |
$ 41,408 |
$ 530 |
$ 151,371 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
23 |
(236) |
1 |
1,293 |
||||||||
Net realized gain (loss) on investments |
(9) |
(5,562) |
(43) |
(10,631) |
||||||||
Net unrealized appreciation (depreciation) of investments |
111 |
19,283 |
436 |
52,584 |
||||||||
Net increase (decrease) in net assets from operations |
125 |
13,485 |
394 |
43,246 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
62 |
6,192 |
554 |
28,806 |
||||||||
Administrative expenses |
(11) |
(2,957) |
(106) |
(9,582) |
||||||||
Benefit payments |
- |
(64) |
- |
(73) |
||||||||
Surrenders and withdrawals |
- |
(4,045) |
(21) |
(13,138) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
73 |
(69) |
649 |
(4,801) |
||||||||
Other |
219 |
(199) |
- |
(147) |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
343 |
(1,142) |
1,076 |
1,065 |
||||||||
Total increase (decrease) in net assets |
468 |
12,343 |
1,470 |
44,311 |
||||||||
Net assets at December 31, 2003 |
1,056 |
53,751 |
2,000 |
195,682 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
34 |
(240) |
4 |
1,947 |
||||||||
Net realized gain (loss) on investments |
15 |
(1,096) |
218 |
(1,309) |
||||||||
Capital gains distributions |
- |
- |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
27 |
2,415 |
(115) |
3,944 |
||||||||
Net increase (decrease) in net assets from operations |
76 |
1,079 |
107 |
4,582 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
312 |
5,312 |
639 |
13,491 |
||||||||
Administrative expenses |
(88) |
(2,720) |
(174) |
(4,640) |
||||||||
Benefit payments |
- |
- |
- |
(7) |
||||||||
Surrenders and withdrawals |
(8) |
(3,851) |
(42) |
(4,906) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
299 |
(4,241) |
259 |
(204,231) |
||||||||
Other |
3 |
17 |
- |
29 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
518 |
(5,483) |
682 |
(200,264) |
||||||||
Total increase (decrease) in net assets |
594 |
(4,404) |
789 |
(195,682) |
||||||||
Net assets at December 31, 2004 |
$ 1,650 |
$ 49,347 |
$ 2,789 |
$ - |
The accompanying notes are an integral part of these financial statements. |
S-41 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
Fidelity® VIP |
||||||||||||
Money |
Fidelity® VIP |
Fidelity® VIP |
ING VP |
|||||||||
Market |
Overseas |
Overseas SC |
Bond |
|||||||||
Net assets at January 1, 2003 |
$ 101,019 |
$ 25,636 |
$ 568 |
$ 2,539 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
215 |
7 |
5 |
52 |
||||||||
Net realized gain (loss) on investments |
1 |
3,817 |
(16) |
108 |
||||||||
Net unrealized appreciation (depreciation) of investments |
(1) |
7,962 |
373 |
105 |
||||||||
Net increase (decrease) in net assets from operations |
215 |
11,786 |
362 |
265 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
22,900 |
3,447 |
349 |
1,571 |
||||||||
Administrative expenses |
(4,335) |
(1,642) |
(79) |
(322) |
||||||||
Benefit payments |
(1,308) |
(1) |
- |
- |
||||||||
Surrenders and withdrawals |
(12,457) |
(2,219) |
(16) |
(562) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
(37,817) |
1,286 |
455 |
2,257 |
||||||||
Other |
101 |
1 |
2 |
27 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
(32,916) |
872 |
711 |
2,971 |
||||||||
Total increase (decrease) in net assets |
(32,701) |
12,658 |
1,073 |
3,236 |
||||||||
Net assets at December 31, 2003 |
68,318 |
38,294 |
1,641 |
5,775 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
69 |
173 |
19 |
570 |
||||||||
Net realized gain (loss) on investments |
1 |
2,867 |
166 |
(39) |
||||||||
Capital gains distributions |
- |
- |
- |
297 |
||||||||
Net unrealized appreciation (depreciation) of investments |
(1) |
1,404 |
158 |
(540) |
||||||||
Net increase (decrease) in net assets from operations |
69 |
4,444 |
343 |
288 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
17,326 |
3,779 |
509 |
2,444 |
||||||||
Administrative expenses |
(1,689) |
(1,605) |
(141) |
(421) |
||||||||
Benefit payments |
(862) |
(17) |
- |
(8) |
||||||||
Surrenders and withdrawals |
(5,232) |
(2,946) |
(64) |
(543) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
(77,903) |
(1,926) |
783 |
1,163 |
||||||||
Other |
(27) |
9 |
(2) |
7 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
(68,387) |
(2,706) |
1,085 |
2,642 |
||||||||
Total increase (decrease) in net assets |
(68,318) |
1,738 |
1,428 |
2,930 |
||||||||
Net assets at December 31, 2004 |
$ - |
$ 40,032 |
$ 3,069 |
$ 8,705 |
The accompanying notes are an integral part of these financial statements. |
S-42 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
ING |
||||||||||||
JPMorgan |
||||||||||||
ING Liquid |
Small Cap |
ING |
ING Legg |
|||||||||
Assets |
Equity |
Stock Index |
Mason Value |
|||||||||
Net assets at January 1, 2003 |
$ - |
$ - |
$ - |
$ - |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
- |
- |
- |
- |
||||||||
Net realized gain (loss) on investments |
- |
- |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
- |
- |
- |
- |
||||||||
Net increase (decrease) in net assets from operations |
- |
- |
- |
- |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
- |
- |
- |
- |
||||||||
Administrative expenses |
- |
- |
- |
- |
||||||||
Benefit payments |
- |
- |
- |
- |
||||||||
Surrenders and withdrawals |
- |
- |
- |
- |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
- |
- |
- |
- |
||||||||
Other |
- |
- |
- |
- |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
- |
- |
- |
- |
||||||||
Total increase (decrease) in net assets |
- |
- |
- |
- |
||||||||
Net assets at December 31, 2003 |
- |
- |
- |
- |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
241 |
(73) |
1,663 |
- |
||||||||
Net realized gain (loss) on investments |
- |
93 |
(20) |
1 |
||||||||
Capital gains distributions |
- |
23 |
617 |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
- |
2,978 |
12,908 |
180 |
||||||||
Net increase (decrease) in net assets from operations |
241 |
3,021 |
15,168 |
181 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
9,159 |
1,067 |
11,357 |
42 |
||||||||
Administrative expenses |
(1,920) |
(630) |
(5,052) |
(9) |
||||||||
Benefit payments |
(512) |
- |
- |
- |
||||||||
Surrenders and withdrawals |
(7,658) |
(1,274) |
(6,367) |
- |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
58,739 |
19,973 |
205,428 |
1,446 |
||||||||
Other |
7 |
2 |
16 |
- |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
57,815 |
19,138 |
205,382 |
1,479 |
||||||||
Total increase (decrease) in net assets |
58,056 |
22,159 |
220,550 |
1,660 |
||||||||
Net assets at December 31, 2004 |
$ 58,056 |
$ 22,159 |
$ 220,550 |
$ 1,660 |
The accompanying notes are an integral part of these financial statements. |
S-43 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
ING |
||||||||||||
Van Kampen |
ING Limited |
|||||||||||
IMG Mercury |
Equity |
ING Hard |
Maturity |
|||||||||
Focus Value |
Growth |
Assets |
Bond |
|||||||||
Net assets at January 1, 2003 |
$ - |
$ - |
$ - |
$ 329 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
- |
- |
- |
5 |
||||||||
Net realized gain (loss) on investments |
- |
- |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
- |
- |
6 |
6 |
||||||||
Net increase (decrease) in net assets from operations |
- |
- |
6 |
11 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
- |
- |
15 |
141 |
||||||||
Administrative expenses |
- |
- |
(1) |
(18) |
||||||||
Benefit payments |
- |
- |
- |
(1) |
||||||||
Surrenders and withdrawals |
- |
- |
- |
(26) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
- |
- |
41 |
29 |
||||||||
Other |
- |
- |
- |
- |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
- |
- |
55 |
125 |
||||||||
Total increase (decrease) in net assets |
- |
- |
61 |
136 |
||||||||
Net assets at December 31, 2003 |
- |
- |
61 |
465 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(11) |
(11) |
10 |
71 |
||||||||
Net realized gain (loss) on investments |
5 |
(11) |
(28) |
3 |
||||||||
Capital gains distributions |
1,193 |
22 |
- |
11 |
||||||||
Net unrealized appreciation (depreciation) of investments |
526 |
235 |
78 |
(76) |
||||||||
Net increase (decrease) in net assets from operations |
1,713 |
235 |
60 |
9 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
1,389 |
303 |
129 |
594 |
||||||||
Administrative expenses |
(722) |
(116) |
(70) |
(21) |
||||||||
Benefit payments |
- |
- |
- |
(7) |
||||||||
Surrenders and withdrawals |
(1,910) |
(399) |
(1) |
(52) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
27,371 |
4,680 |
1,249 |
377 |
||||||||
Other |
(11) |
1 |
- |
- |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
26,117 |
4,469 |
1,307 |
891 |
||||||||
Total increase (decrease) in net assets |
27,830 |
4,704 |
1,367 |
900 |
||||||||
Net assets at December 31, 2004 |
$ 27,830 |
$ 4,704 |
$ 1,428 |
$ 1,365 |
The accompanying notes are an integral part of these financial statements. |
S-44 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
ING MFS |
ING MFS |
|||||||||||
ING Liquid |
ING Marsico |
Mid Cap |
Total |
|||||||||
Assets SC |
Growth |
Growth |
Return |
|||||||||
Net assets at January 1, 2003 |
$ 20,314 |
$ 5 |
$ 1,479 |
$ 151 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
161 |
(3) |
(9) |
6 |
||||||||
Net realized gain (loss) on investments |
- |
52 |
(41) |
1 |
||||||||
Net unrealized appreciation (depreciation) of investments |
- |
51 |
639 |
86 |
||||||||
Net increase (decrease) in net assets from operations |
161 |
100 |
589 |
93 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
23,396 |
531 |
713 |
204 |
||||||||
Administrative expenses |
(1,852) |
(21) |
(125) |
(18) |
||||||||
Benefit payments |
(17) |
- |
- |
- |
||||||||
Surrenders and withdrawals |
(1,387) |
(6) |
(35) |
(1) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
(19,618) |
1,245 |
296 |
817 |
||||||||
Other |
(4) |
16 |
6 |
- |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
518 |
1,765 |
855 |
1,002 |
||||||||
Total increase (decrease) in net assets |
679 |
1,865 |
1,445 |
1,095 |
||||||||
Net assets at December 31, 2003 |
20,993 |
1,870 |
2,923 |
1,246 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
208 |
(13) |
(15) |
47 |
||||||||
Net realized gain (loss) on investments |
- |
87 |
327 |
86 |
||||||||
Capital gains distributions |
- |
- |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
- |
294 |
179 |
109 |
||||||||
Net increase (decrease) in net assets from operations |
208 |
368 |
491 |
242 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
38,879 |
558 |
559 |
518 |
||||||||
Administrative expenses |
(1,868) |
(99) |
(186) |
(103) |
||||||||
Benefit payments |
(925) |
- |
- |
- |
||||||||
Surrenders and withdrawals |
(1,615) |
(67) |
(74) |
(58) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
(34,849) |
570 |
536 |
1,171 |
||||||||
Other |
(9) |
5 |
9 |
7 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
(387) |
967 |
844 |
1,535 |
||||||||
Total increase (decrease) in net assets |
(179) |
1,335 |
1,335 |
1,777 |
||||||||
Net assets at December 31, 2004 |
$ 20,814 |
$ 3,205 |
$ 4,257 |
$ 3,023 |
The accompanying notes are an integral part of these financial statements. |
S-45 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
ING |
||||||||||||
ING |
ING T. Rowe |
ING T. Rowe |
JPMorgan |
|||||||||
Oppenheimer |
Price Capital |
Price Equity |
Mid Cap |
|||||||||
Main Street |
Appreciation |
Income |
Value |
|||||||||
Net assets at January 1, 2003 |
$ 4 |
$ 11,222 |
$ 99 |
$ - |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
- |
35 |
7 |
11 |
||||||||
Net realized gain (loss) on investments |
- |
64 |
19 |
11 |
||||||||
Net unrealized appreciation (depreciation) of investments |
1 |
3,883 |
244 |
60 |
||||||||
Net increase (decrease) in net assets from operations |
1 |
3,982 |
270 |
82 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
2 |
3,685 |
207 |
230 |
||||||||
Administrative expenses |
- |
(981) |
(29) |
(18) |
||||||||
Benefit payments |
- |
(349) |
- |
- |
||||||||
Surrenders and withdrawals |
- |
(448) |
(4) |
- |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
- |
5,198 |
2,188 |
839 |
||||||||
Other |
- |
(1) |
3 |
6 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
2 |
7,104 |
2,365 |
1,057 |
||||||||
Total increase (decrease) in net assets |
3 |
11,086 |
2,635 |
1,139 |
||||||||
Net assets at December 31, 2003 |
7 |
22,308 |
2,734 |
1,139 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
- |
224 |
67 |
5 |
||||||||
Net realized gain (loss) on investments |
- |
527 |
57 |
68 |
||||||||
Capital gains distributions |
- |
210 |
50 |
178 |
||||||||
Net unrealized appreciation (depreciation) of investments |
(1) |
3,283 |
785 |
404 |
||||||||
Net increase (decrease) in net assets from operations |
(1) |
4,244 |
959 |
655 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
14 |
4,006 |
1,077 |
947 |
||||||||
Administrative expenses |
- |
(1,331) |
(182) |
(145) |
||||||||
Benefit payments |
- |
- |
- |
- |
||||||||
Surrenders and withdrawals |
- |
(770) |
(70) |
(101) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
(21) |
4,532 |
5,955 |
3,680 |
||||||||
Other |
1 |
12 |
7 |
1 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
(6) |
6,449 |
6,787 |
4,382 |
||||||||
Total increase (decrease) in net assets |
(7) |
10,693 |
7,746 |
5,037 |
||||||||
Net assets at December 31, 2004 |
$ - |
$ 33,001 |
$ 10,480 |
$ 6,176 |
The accompanying notes are an integral part of these financial statements. |
S-46 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
ING Salomon |
||||||||||||
ING PIMCO |
Brothers |
ING Salomon |
ING |
|||||||||
Total |
Aggressive |
Brothers |
Van Kampen |
|||||||||
Return |
Growth |
Investors |
Comstock |
|||||||||
Net assets at January 1, 2003 |
$ - |
$ - |
$ - |
$ 1,265 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
169 |
- |
- |
81 |
||||||||
Net realized gain (loss) on investments |
(12) |
- |
- |
75 |
||||||||
Net unrealized appreciation (depreciation) of investments |
(43) |
7 |
14 |
498 |
||||||||
Net increase (decrease) in net assets from operations |
114 |
7 |
14 |
654 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
705 |
14 |
1 |
779 |
||||||||
Administrative expenses |
(72) |
(4) |
(2) |
(144) |
||||||||
Benefit payments |
- |
- |
- |
- |
||||||||
Surrenders and withdrawals |
(3) |
- |
- |
(75) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
5,143 |
106 |
148 |
1,553 |
||||||||
Other |
(3) |
- |
- |
2 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
5,770 |
116 |
147 |
2,115 |
||||||||
Total increase (decrease) in net assets |
5,884 |
123 |
161 |
2,769 |
||||||||
Net assets at December 31, 2003 |
5,884 |
123 |
161 |
4,034 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(47) |
(1) |
2 |
(27) |
||||||||
Net realized gain (loss) on investments |
95 |
13 |
21 |
317 |
||||||||
Capital gains distributions |
88 |
- |
- |
32 |
||||||||
Net unrealized appreciation (depreciation) of investments |
168 |
13 |
25 |
732 |
||||||||
Net increase (decrease) in net assets from operations |
304 |
25 |
48 |
1,054 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
1,270 |
53 |
174 |
1,449 |
||||||||
Administrative expenses |
(306) |
(26) |
(17) |
(292) |
||||||||
Benefit payments |
- |
- |
- |
- |
||||||||
Surrenders and withdrawals |
(4,077) |
(20) |
- |
(170) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
3,176 |
70 |
576 |
2,158 |
||||||||
Other |
(1) |
1 |
- |
4 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
62 |
78 |
733 |
3,149 |
||||||||
Total increase (decrease) in net assets |
366 |
103 |
781 |
4,203 |
||||||||
Net assets at December 31, 2004 |
$ 6,250 |
$ 226 |
$ 942 |
$ 8,237 |
The accompanying notes are an integral part of these financial statements. |
S-47 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
ING Van |
ING VP |
ING VP |
ING VP |
|||||||||
Kampen |
Strategic |
Strategic |
Strategic |
|||||||||
Equity and |
Allocation |
Allocation |
Allocation |
|||||||||
Income |
Balanced |
Growth |
Income |
|||||||||
Net assets at January 1, 2003 |
$ 15 |
$ - |
$ - |
$ - |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
- |
- |
- |
- |
||||||||
Net realized gain (loss) on investments |
2 |
- |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
12 |
- |
- |
- |
||||||||
Net increase (decrease) in net assets from operations |
14 |
- |
- |
- |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
23 |
- |
- |
- |
||||||||
Administrative expenses |
(7) |
- |
- |
- |
||||||||
Benefit payments |
- |
- |
- |
- |
||||||||
Surrenders and withdrawals |
- |
- |
- |
- |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
95 |
- |
- |
- |
||||||||
Other |
3 |
- |
- |
- |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
114 |
- |
- |
- |
||||||||
Total increase (decrease) in net assets |
128 |
- |
- |
- |
||||||||
Net assets at December 31, 2003 |
143 |
- |
- |
- |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
2 |
- |
- |
- |
||||||||
Net realized gain (loss) on investments |
4 |
- |
- |
- |
||||||||
Capital gains distributions |
- |
- |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
49 |
- |
- |
1 |
||||||||
Net increase (decrease) in net assets from operations |
55 |
- |
- |
1 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
247 |
- |
2 |
9 |
||||||||
Administrative expenses |
(51) |
- |
- |
- |
||||||||
Benefit payments |
- |
- |
- |
- |
||||||||
Surrenders and withdrawals |
(1) |
- |
- |
- |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
482 |
31 |
40 |
42 |
||||||||
Other |
2 |
- |
- |
- |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
679 |
31 |
42 |
51 |
||||||||
Total increase (decrease) in net assets |
734 |
31 |
42 |
52 |
||||||||
Net assets at December 31, 2004 |
$ 877 |
$ 31 |
$ 42 |
$ 52 |
The accompanying notes are an integral part of these financial statements. |
S-48 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
ING VP Index |
ING VP Index |
ING VP Index |
ING VP |
|||||||||
Plus |
Plus |
Plus |
Growth |
|||||||||
Large Cap |
Mid Cap |
Small Cap |
Opportunities |
|||||||||
Net assets at January 1, 2003 |
$ 389 |
$ 3,193 |
$ 630 |
$ 130 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
23 |
7 |
(4) |
(1) |
||||||||
Net realized gain (loss) on investments |
32 |
37 |
29 |
(12) |
||||||||
Net unrealized appreciation (depreciation) of investments |
607 |
1,415 |
574 |
75 |
||||||||
Net increase (decrease) in net assets from operations |
662 |
1,459 |
599 |
62 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
1,165 |
1,538 |
576 |
76 |
||||||||
Administrative expenses |
(117) |
(204) |
(68) |
(10) |
||||||||
Benefit payments |
- |
- |
- |
- |
||||||||
Surrenders and withdrawals |
(5) |
(8) |
(30) |
- |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
2,129 |
1,824 |
1,198 |
23 |
||||||||
Other |
1 |
- |
1 |
- |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
3,173 |
3,150 |
1,677 |
89 |
||||||||
Total increase (decrease) in net assets |
3,835 |
4,609 |
2,276 |
151 |
||||||||
Net assets at December 31, 2003 |
4,224 |
7,802 |
2,906 |
281 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
30 |
13 |
(13) |
- |
||||||||
Net realized gain (loss) on investments |
228 |
463 |
260 |
45 |
||||||||
Capital gains distributions |
- |
- |
23 |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
243 |
1,150 |
607 |
(30) |
||||||||
Net increase (decrease) in net assets from operations |
501 |
1,626 |
877 |
15 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
936 |
2,257 |
803 |
10 |
||||||||
Administrative expenses |
(231) |
(432) |
(161) |
(4) |
||||||||
Benefit payments |
(18) |
- |
- |
- |
||||||||
Surrenders and withdrawals |
(71) |
(156) |
(118) |
- |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
71 |
2,464 |
2,217 |
(302) |
||||||||
Other |
6 |
8 |
11 |
- |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
693 |
4,141 |
2,752 |
(296) |
||||||||
Total increase (decrease) in net assets |
1,194 |
5,767 |
3,629 |
(281) |
||||||||
Net assets at December 31, 2004 |
$ 5,418 |
$ 13,569 |
$ 6,535 |
$ - |
The accompanying notes are an integral part of these financial statements. |
S-49 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
ING VP |
ING VP |
INVESCO |
||||||||||
ING VP |
MidCap |
SmallCap |
VIF - High |
|||||||||
MagnaCap |
Opportunities |
Opportunities |
Yield |
|||||||||
Net assets at January 1, 2003 |
$ 1,026 |
$ 868 |
$ 1,297 |
$ 23,179 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
7 |
(4) |
(11) |
1,390 |
||||||||
Net realized gain (loss) on investments |
(57) |
2 |
(234) |
1,159 |
||||||||
Net unrealized appreciation (depreciation) of investments |
387 |
361 |
861 |
2,950 |
||||||||
Net increase (decrease) in net assets from operations |
337 |
359 |
616 |
5,499 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
235 |
406 |
391 |
2,268 |
||||||||
Administrative expenses |
(78) |
(73) |
(112) |
(1,270) |
||||||||
Benefit payments |
- |
- |
(40) |
(3) |
||||||||
Surrenders and withdrawals |
(98) |
(327) |
(20) |
(899) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
(142) |
167 |
635 |
(1,021) |
||||||||
Other |
1 |
4 |
(24) |
15 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
(82) |
177 |
830 |
(910) |
||||||||
Total increase (decrease) in net assets |
255 |
536 |
1,446 |
4,589 |
||||||||
Net assets at December 31, 2003 |
1,281 |
1,404 |
2,743 |
27,768 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
16 |
(5) |
(16) |
1,824 |
||||||||
Net realized gain (loss) on investments |
62 |
187 |
176 |
184 |
||||||||
Capital gains distributions |
- |
- |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
57 |
18 |
57 |
(1,508) |
||||||||
Net increase (decrease) in net assets from operations |
135 |
200 |
217 |
500 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
218 |
316 |
639 |
602 |
||||||||
Administrative expenses |
(73) |
(127) |
(167) |
(438) |
||||||||
Benefit payments |
- |
- |
- |
(7) |
||||||||
Surrenders and withdrawals |
(14) |
(65) |
(92) |
(465) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
303 |
757 |
340 |
(27,965) |
||||||||
Other |
1 |
(3) |
(2) |
5 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
435 |
878 |
718 |
(28,268) |
||||||||
Total increase (decrease) in net assets |
570 |
1,078 |
935 |
(27,768) |
||||||||
Net assets at December 31, 2004 |
$ 1,851 |
$ 2,482 |
$ 3,678 |
$ - |
The accompanying notes are an integral part of these financial statements. |
S-50 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
Janus Aspen |
Janus Aspen |
Janus Aspen |
||||||||||
Janus Aspen |
International |
Mid Cap |
Worldwide |
|||||||||
Growth |
Growth |
Growth |
Growth |
|||||||||
Net assets at January 1, 2003 |
$ 2,560 |
$ 4,484 |
$ 1,539 |
$ 3,609 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(18) |
30 |
(13) |
11 |
||||||||
Net realized gain (loss) on investments |
(27) |
(462) |
(222) |
(459) |
||||||||
Net unrealized appreciation (depreciation) of investments |
942 |
2,249 |
832 |
1,268 |
||||||||
Net increase (decrease) in net assets from operations |
897 |
1,817 |
597 |
820 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
812 |
1,263 |
547 |
866 |
||||||||
Administrative expenses |
(195) |
(311) |
(145) |
(235) |
||||||||
Benefit payments |
- |
(1) |
- |
- |
||||||||
Surrenders and withdrawals |
(299) |
(403) |
(44) |
(258) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
241 |
39 |
(299) |
(995) |
||||||||
Other |
3 |
(5) |
8 |
(1) |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
562 |
582 |
67 |
(623) |
||||||||
Total increase (decrease) in net assets |
1,459 |
2,399 |
664 |
197 |
||||||||
Net assets at December 31, 2003 |
4,019 |
6,883 |
2,203 |
3,806 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(10) |
23 |
(15) |
13 |
||||||||
Net realized gain (loss) on investments |
825 |
1,288 |
49 |
(86) |
||||||||
Capital gains distributions |
- |
- |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
(754) |
(261) |
435 |
187 |
||||||||
Net increase (decrease) in net assets from operations |
61 |
1,050 |
469 |
114 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
705 |
1,195 |
378 |
634 |
||||||||
Administrative expenses |
(107) |
(339) |
(141) |
(184) |
||||||||
Benefit payments |
- |
- |
- |
- |
||||||||
Surrenders and withdrawals |
(95) |
(523) |
(99) |
(338) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
(4,584) |
(1,001) |
179 |
(582) |
||||||||
Other |
1 |
3 |
(1) |
(1) |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
(4,080) |
(665) |
316 |
(471) |
||||||||
Total increase (decrease) in net assets |
(4,019) |
385 |
785 |
(357) |
||||||||
Net assets at December 31, 2004 |
$ - |
$ 7,268 |
$ 2,988 |
$ 3,449 |
The accompanying notes are an integral part of these financial statements. |
S-51 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
Brandes |
Business |
Clifton |
Frontier |
|||||||||
International |
Opportunity |
Enhanced |
Capital |
|||||||||
Equity |
Value |
US Equity |
Appreciation |
|||||||||
Net assets at January 1, 2003 |
$ 5,757 |
$ 200 |
$ 2,053 |
$ 3,390 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
24 |
3 |
(5) |
(35) |
||||||||
Net realized gain (loss) on investments |
(30) |
13 |
(437) |
71 |
||||||||
Net unrealized appreciation (depreciation) of investments |
2,892 |
200 |
520 |
2,127 |
||||||||
Net increase (decrease) in net assets from operations |
2,886 |
216 |
78 |
2,163 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
598 |
108 |
62 |
304 |
||||||||
Administrative expenses |
(277) |
(45) |
(51) |
(191) |
||||||||
Benefit payments |
- |
- |
- |
- |
||||||||
Surrenders and withdrawals |
(266) |
(110) |
- |
(366) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
(378) |
731 |
(2,146) |
621 |
||||||||
Other |
10 |
3 |
4 |
5 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
(313) |
687 |
(2,131) |
373 |
||||||||
Total increase (decrease) in net assets |
2,573 |
903 |
(2,053) |
2,536 |
||||||||
Net assets at December 31, 2003 |
8,330 |
1,103 |
- |
5,926 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
51 |
2 |
- |
(40) |
||||||||
Net realized gain (loss) on investments |
287 |
62 |
- |
906 |
||||||||
Capital gains distributions |
560 |
12 |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
1,187 |
185 |
- |
(423) |
||||||||
Net increase (decrease) in net assets from operations |
2,085 |
261 |
- |
443 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
1,116 |
263 |
- |
609 |
||||||||
Administrative expenses |
(393) |
(68) |
- |
(207) |
||||||||
Benefit payments |
- |
- |
- |
- |
||||||||
Surrenders and withdrawals |
(464) |
(21) |
- |
(394) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
910 |
404 |
- |
451 |
||||||||
Other |
(3) |
1 |
- |
(2) |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
1,166 |
579 |
- |
457 |
||||||||
Total increase (decrease) in net assets |
3,251 |
840 |
- |
900 |
||||||||
Net assets at December 31, 2004 |
$ 11,581 |
$ 1,943 |
$ - |
$ 6,826 |
The accompanying notes are an integral part of these financial statements. |
S-52 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
Neuberger |
||||||||||||
Neuberger |
Berman AMT |
Neuberger |
||||||||||
Turner |
Berman AMT |
Limited |
Berman AMT |
|||||||||
Core Growth |
Growth |
Maturity Bond |
Partners |
|||||||||
Net assets at January 1, 2003 |
$ 619 |
$ 9,722 |
$ 32,704 |
$ 23,077 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(4) |
(78) |
1,256 |
(200) |
||||||||
Net realized gain (loss) on investments |
(43) |
(1,610) |
295 |
(624) |
||||||||
Net unrealized appreciation (depreciation) of investments |
347 |
4,515 |
(988) |
8,947 |
||||||||
Net increase (decrease) in net assets from operations |
300 |
2,827 |
563 |
8,123 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
99 |
1,879 |
4,261 |
3,291 |
||||||||
Administrative expenses |
(55) |
(585) |
(1,471) |
(1,593) |
||||||||
Benefit payments |
- |
(2) |
(48) |
(9) |
||||||||
Surrenders and withdrawals |
(159) |
(388) |
(2,195) |
(1,954) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
732 |
954 |
(3,127) |
1,065 |
||||||||
Other |
2 |
1 |
(1) |
14 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
619 |
1,859 |
(2,581) |
814 |
||||||||
Total increase (decrease) in net assets |
919 |
4,686 |
(2,018) |
8,937 |
||||||||
Net assets at December 31, 2003 |
1,538 |
14,408 |
30,686 |
32,014 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(7) |
(100) |
804 |
(114) |
||||||||
Net realized gain (loss) on investments |
118 |
(433) |
43 |
4,203 |
||||||||
Capital gains distributions |
- |
- |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
133 |
2,567 |
(802) |
(2,662) |
||||||||
Net increase (decrease) in net assets from operations |
244 |
2,034 |
45 |
1,427 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
262 |
1,598 |
2,782 |
1,290 |
||||||||
Administrative expenses |
(134) |
(603) |
(1,262) |
(730) |
||||||||
Benefit payments |
- |
- |
- |
(1) |
||||||||
Surrenders and withdrawals |
(98) |
(1,277) |
(3,723) |
(876) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
841 |
(2,674) |
(714) |
(33,143) |
||||||||
Other |
(1) |
5 |
1 |
19 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
870 |
(2,951) |
(2,916) |
(33,441) |
||||||||
Total increase (decrease) in net assets |
1,114 |
(917) |
(2,871) |
(32,014) |
||||||||
Net assets at December 31, 2004 |
$ 2,652 |
$ 13,491 |
$ 27,815 |
$ - |
The accompanying notes are an integral part of these financial statements. |
S-53 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
Pioneer |
Pioneer |
Putnam VT |
Putnam VT |
|||||||||
Mid-Cap |
Small Cap |
Growth and |
New |
|||||||||
Value VCT |
Value VCT |
Income |
Opportunities |
|||||||||
Net assets at January 1, 2003 |
$ 864 |
$ 760 |
$ 5,213 |
$ 579 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(12) |
(12) |
63 |
(4) |
||||||||
Net realized gain (loss) on investments |
279 |
363 |
(331) |
(18) |
||||||||
Net unrealized appreciation (depreciation) of investments |
788 |
301 |
1,699 |
225 |
||||||||
Net increase (decrease) in net assets from operations |
1,055 |
652 |
1,431 |
203 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
916 |
317 |
940 |
122 |
||||||||
Administrative expenses |
(159) |
(73) |
(301) |
(39) |
||||||||
Benefit payments |
- |
- |
(42) |
- |
||||||||
Surrenders and withdrawals |
(263) |
(42) |
(1,248) |
(16) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
4,711 |
843 |
(682) |
(75) |
||||||||
Other |
(9) |
(2) |
(11) |
2 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
5,196 |
1,043 |
(1,344) |
(6) |
||||||||
Total increase (decrease) in net assets |
6,251 |
1,695 |
87 |
197 |
||||||||
Net assets at December 31, 2003 |
7,115 |
2,455 |
5,300 |
776 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(29) |
(20) |
54 |
(8) |
||||||||
Net realized gain (loss) on investments |
688 |
219 |
128 |
(12) |
||||||||
Capital gains distributions |
106 |
- |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
1,589 |
608 |
454 |
261 |
||||||||
Net increase (decrease) in net assets from operations |
2,354 |
807 |
636 |
241 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
2,918 |
843 |
1,036 |
84 |
||||||||
Administrative expenses |
(494) |
(170) |
(297) |
(99) |
||||||||
Benefit payments |
- |
- |
- |
- |
||||||||
Surrenders and withdrawals |
(147) |
(79) |
(314) |
(32) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
4,466 |
1,607 |
777 |
2,219 |
||||||||
Other |
7 |
5 |
10 |
6 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
6,750 |
2,206 |
1,212 |
2,178 |
||||||||
Total increase (decrease) in net assets |
9,104 |
3,013 |
1,848 |
2,419 |
||||||||
Net assets at December 31, 2004 |
$ 16,219 |
$ 5,468 |
$ 7,148 |
$ 3,195 |
The accompanying notes are an integral part of these financial statements. |
S-54 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
Van Eck |
||||||||||||
Putnam VT |
Van Eck |
Worldwide |
||||||||||
Small Cap |
Putnam VT |
Worldwide |
Emerging |
|||||||||
Value |
Voyager |
Bond |
Markets |
|||||||||
Net assets at January 1, 2003 |
$ 9,712 |
$ 1,275 |
$ 3,820 |
$ 5,740 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(40) |
(3) |
37 |
(44) |
||||||||
Net realized gain (loss) on investments |
(449) |
(133) |
439 |
95 |
||||||||
Net unrealized appreciation (depreciation) of investments |
5,709 |
463 |
237 |
3,331 |
||||||||
Net increase (decrease) in net assets from operations |
5,220 |
327 |
713 |
3,382 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
1,940 |
311 |
917 |
981 |
||||||||
Administrative expenses |
(679) |
(67) |
(382) |
(338) |
||||||||
Benefit payments |
(1) |
- |
- |
- |
||||||||
Surrenders and withdrawals |
(1,270) |
(9) |
(355) |
(321) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
1,001 |
(382) |
662 |
1,543 |
||||||||
Other |
2 |
- |
(4) |
11 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
993 |
(147) |
838 |
1,876 |
||||||||
Total increase (decrease) in net assets |
6,213 |
180 |
1,551 |
5,258 |
||||||||
Net assets at December 31, 2003 |
15,925 |
1,455 |
5,371 |
10,998 |
||||||||
Increase (decrease) in net assets |
||||||||||||
Operations: |
||||||||||||
Net investment income (loss) |
(37) |
(3) |
432 |
(5) |
||||||||
Net realized gain (loss) on investments |
1,711 |
97 |
138 |
1,944 |
||||||||
Capital gains distributions |
- |
- |
- |
- |
||||||||
Net unrealized appreciation (depreciation) of investments |
2,329 |
(22) |
(197) |
731 |
||||||||
Net increase (decrease) in net assets from operations |
4,003 |
72 |
373 |
2,670 |
||||||||
Changes from principal transactions: |
||||||||||||
Contract purchase payments |
2,880 |
288 |
695 |
1,414 |
||||||||
Administrative expenses |
(893) |
(80) |
(306) |
(454) |
||||||||
Benefit payments |
- |
- |
- |
- |
||||||||
Surrenders and withdrawals |
(1,311) |
(26) |
(255) |
(486) |
||||||||
Transfer payments from (to) other Divisions (including |
||||||||||||
theGID),net |
318 |
(134) |
(629) |
113 |
||||||||
Other |
5 |
(1) |
(1) |
2 |
||||||||
Increase (decrease) in net assets derived from principal |
||||||||||||
transactions |
999 |
47 |
(496) |
589 |
||||||||
Total increase (decrease) in net assets |
5,002 |
119 |
(123) |
3,259 |
||||||||
Net assets at December 31, 2004 |
$ 20,927 |
$ 1,574 |
$ 5,248 |
$ 14,257 |
The accompanying notes are an integral part of these financial statements. |
S-55 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Statements of Changes in Net Assets |
For the years ended December 31, 2004 and 2003 |
(Dollars in thousands) |
Van Eck |
Van Eck |
|||||||
Worldwide |
Worldwide |
|||||||
Hard Assets |
Real Estate |
|||||||
Net assets at January 1, 2003 |
$ 2,148 |
$ 4,886 |
||||||
Increase (decrease) in net assets |
||||||||
Operations: |
||||||||
Net investment income (loss) |
(9) |
73 |
||||||
Net realized gain (loss) on investments |
(247) |
94 |
||||||
Net unrealized appreciation (depreciation) of investments |
1,623 |
1,497 |
||||||
Net increase (decrease) in net assets from operations |
1,367 |
1,664 |
||||||
Changes from principal transactions: |
||||||||
Contract purchase payments |
257 |
717 |
||||||
Administrative expenses |
(198) |
(285) |
||||||
Benefit payments |
- |
- |
||||||
Surrenders and withdrawals |
(422) |
(273) |
||||||
Transfer payments from (to) other Divisions (including |
||||||||
theGID),net |
4,065 |
(100) |
||||||
Other |
7 |
5 |
||||||
Increase (decrease) in net assets derived from principal |
||||||||
transactions |
3,709 |
64 |
||||||
Total increase (decrease) in net assets |
5,076 |
1,728 |
||||||
Net assets at December 31, 2003 |
7,224 |
6,614 |
||||||
Increase (decrease) in net assets |
||||||||
Operations: |
||||||||
Net investment income (loss) |
(14) |
65 |
||||||
Net realized gain (loss) on investments |
1,233 |
683 |
||||||
Capital gains distributions |
- |
- |
||||||
Net unrealized appreciation (depreciation) of investments |
94 |
1,868 |
||||||
Net increase (decrease) in net assets from operations |
1,313 |
2,616 |
||||||
Changes from principal transactions: |
||||||||
Contract purchase payments |
476 |
1,468 |
||||||
Administrative expenses |
(230) |
(396) |
||||||
Benefit payments |
- |
- |
||||||
Surrenders and withdrawals |
(117) |
(390) |
||||||
Transfer payments from (to) other Divisions (including |
||||||||
theGID),net |
(292) |
1,375 |
||||||
Other |
(15) |
4 |
||||||
Increase (decrease) in net assets derived from principal |
||||||||
transactions |
(178) |
2,061 |
||||||
Total increase (decrease) in net assets |
1,135 |
4,677 |
||||||
Net assets at December 31, 2004 |
$ 8,359 |
$ 11,291 |
The accompanying notes are an integral part of these financial statements. |
S-56 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
|
SEPARATE ACCOUNT L1 |
|
Notes to Financial Statements |
|
1. |
Organization |
Security Life of Denver Insurance Company Separate Account L1 (the "Account") was established on November 3, 1993, by Security Life of Denver Insurance Company ("SLD" or the "Company") to support the operations of variable universal life policies ("Policies"). The Company is an indirect wholly owned subsidiary of ING America Insurance Holdings ("ING AIH"), an insurance holding company domiciled in the State of Delaware. ING AIH is a wholly owned subsidiary of ING Groep, N.V., a global financial services holding company based in The Netherlands. |
|
The Account supports the operations of the FirstLine Variable Universal Life, FirstLine II Variable Universal Life, Strategic Advantage Variable Universal Life, Strategic Advantage II Variable Universal Life, Variable Survivorship Universal Life, Corporate Benefits Variable Universal Life, Strategic Benefits Variable Universal Life, Asset Portfolio Manager Variable Universal Life, and Estate Designer Policies offered by the Company. Corporate Benefits Variable Universal Life and Strategic Benefits Variable Universal Life became effective in 2000 and are defined as Class B Policies due to their mortality and expense charge structure. Asset Portfolio Manager Variable Universal Life became effective in 2001 and is also defined as a Class B Policy. All other Policies are defined as Class A Policies. |
|
The Account is organized as a unit investment trust registered with the Securities and Exchange Commission under the Investment Company Act of 1940. The Policies allow the Policyholders to specify the allocation of their net premium to the various Funds. They can also transfer their account values among the Funds. The Policies also provide the Policyholders the option to allocate their net premiums, or to transfer their account values, to a guaranteed interest division ("GID") in the Company's general account. The GID guarantees a rate of interest to the Policyholder, and it is not variable in nature. Therefore, it is not included in the Account's statements. The Account may be used to support other variable life policies as the Company offers them. SLD provides for variable accumulation and benefits under the Policies by crediting premium payments to one or more divisions within the Account or the GID, as directed by the Policyholders. The portion of the Account's assets applicable to Policies will not be charged with liabilities arising out of any other business SLD may conduct, but obligations of the Account, including the promise to make benefit payments, are obligations of SLD. The assets and liabilities of the Account are clearly identified and distinguished from the other assets and liabilities of SLD. |
|
At December 31, 2004, the Account had, 69 investment divisions (the "Divisions") 39 of which invest in independently managed mutual funds and 30 of which invest in mutual funds managed by an affiliate, either Direct Services, Inc., ING Investments, LLC, or ING Life Insurance and Annuity Company. The assets in each Division are invested in shares of a designated Fund ("Fund") of various investment trusts (the "Trusts"). |
|
S-57 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
|
SEPARATE ACCOUNT L1 |
|
Notes to Financial Statements |
|
Investment Divisions at December 31, 2004, and related Trusts are as follows: |
AIM Variable Insurance Funds: Class Fidelity® VIP Asset ManagerSM Portfolio - Service Class Fidelity® VIP Growth Portfolio - Initial Class Fidelity® VIP Growth Portfolio - Service Class Fidelity® VIP Overseas Portfolio - Initial Class Fidelity® VIP Overseas Portfolio - Service Class ING Income Shares: ING VP Bond Portfolio - Class I ING Liquid Assets Portfolio Class I** ING JPMorgan Small Cap Equity Portfolio - Class I Shares** ING Stock Index Portfolio - Class I Shares** ING Legg Mason Value Portfolio - Class I Shares** ING Mercury Focus Value Portfolio - Class I Shares** ING Van Kampen Equity Growth Portfolio - Class I Shares** ING Investors Trust: ING Hard Assets Portfolio - Institutional Class* ING Limited Maturity Bond Portfolio - Service Class ING Liquid Assets Portfolio - Service Class ING Marsico Growth Portfolio - Institutional Class |
ING MFS Mid Cap Growth Portfolio - Institutional |
S-58 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Pioneer Variable Contracts Trust: |
Putnam Variable Trust (continued): |
All Contracts in the Account are currently in the accumulation period. |
|
The names of certain Divisions were changed during 2004. The following is a summary of current and former names for those Divisions: |
Current Name |
Former Name |
|||
ING Income Shares: |
ING Income Shares: |
|||
ING VP Bond Portfolio - Class I |
ING VP Bond Portfolio - Class R |
|||
ING Investors Trust: |
ING Investors Trust: |
|||
ING Oppenheimer Main Street Portfolio-Institutional Class |
ING MFS Research Portfolio - Institutional Class |
|||
ING Partners, Inc.: |
ING Partners, Inc.: |
|||
ING Van Kampen Equity and Income-Initial Class |
ING UBS Tactical Asset Allocation Portfolio-Initial Class |
|||
AIM Variable Insurance Funds, Inc.: |
INVESCO Variable Investment Funds, Inc.: |
|||
AIM V.I. Core Stock Fund |
INVESCO VIF - Core Equity Fund |
|||
AIM V.I. Health Sciences Fund |
INVESCO VIF - Health Sciences Fund |
|||
AIM V.I. Small Company Growth Fund |
INVESCO VIF - Small Company Growth Fund |
|||
AIM V.I. Total Return Fund |
INVESCO VIF - Total Return Fund |
|||
AIM V.I. Utilities Fund |
INVESCO VIF - Utilities Fund |
|||
ING Variable Portfolios, Inc.: |
ING Variable Portfolios, Inc.: |
|||
ING VP Index Plus Large Cap Portfolio - Class I |
ING VP Index Plus Large Cap Portfolio - Class R |
|||
ING VP Index Plus Mid Cap Portfolio - Class I |
ING VP Index Plus Mid Cap Portfolio - Class R |
|||
ING VP Index Plus Small Cap Portfolio - Class I |
ING VP Index Plus Small Cap Portfolio - Class R |
|||
ING Variable Products Trust: |
ING Variable Products Trust: |
|||
ING VP Growth Opportunities Portfolio - Class I |
ING VP Growth Opportunities Portfolio - Class R |
|||
ING VP MagnaCap Portfolio - Class I |
ING VP MagnaCap Portfolio - Class R |
|||
ING VP MidCap Opportunities Portfolio - Class I |
ING VP MidCap Opportunities Portfolio - Class R |
|||
ING VP SmallCap Opportunities Portfolio - Class I |
ING VP SmallCap Opportunities Portfolio - Class R |
During 2003, the Clifton Enhanced US Equity Fund was closed to Contractowners. |
|
S-59 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
At December 31, 2004, the following Divisions had no net assets: |
Alger American Small Capitalization Portfolio - Class O Shares |
Fidelity® VIP Index 500 Portfolio - Initial Class |
Fidelity® VIP Money Market Portfolio - Initial Class |
ING Oppenheimer Main Street Portfolio - Institutional Class |
ING VP Growth Opportunities Portfolio - Class I |
INVESCO VIF - High Yield Fund |
Janus Aspen Growth Portfolio - Service Shares |
Clifton Enhanced US Equity Fund |
Neuberger Berman AMT Partners Portfolio - Class I |
2. |
Significant Accounting Policies |
The following is a summary of the significant accounting policies of the Account: |
|
Use of Estimates |
|
The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. |
|
Investments |
|
Investments are made in shares of a Fund and are recorded at fair value, determined by the net asset value per share of the respective Fund. Investment transactions in each Fund are recorded on the date the order to buy or sell is confirmed. Distributions of net investment income and capital gains from each Fund are recognized on the ex-distribution date. Realized gains and losses on redemptions of the shares of the Fund of the Trusts are determined on a first-in, first-out basis. The difference between cost and current market value of investments owned on the day of measurement is recorded as unrealized appreciation or depreciation of investments. |
|
Federal Income Taxes |
|
Operations of the Account form a part of, and are taxed with, the total operations of SLD, which is taxed as a life insurance company under the Internal Revenue Code. Earnings and realized capital gains of the Account attributable to the Policyholders are excluded in the determination of the federal income tax liability of SLD. |
S-60 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Policyholder Reserves |
|
Policyholder reserves are presented as net assets on the Statement of Assets and Liabilities and are equal to the aggregate account values of the Policyholders invested in the Account Divisions. To the extent that benefits to be paid to the Policyholders exceed their account values, SLD will contribute additional funds to the benefit proceeds. Conversely, if amounts allocated exceed amounts required, transfers may be made to SLD. |
|
3. |
Charges and Fees |
Under the terms of the Policies, certain charges are allocated to the Policies to cover SLD's expenses in connection with the issuance and administration of the Policies. Following is a summary of these charges: |
|
Mortality, Expense Risk, and Other Charges |
|
For FirstLine, FirstLine II, Strategic Advantage, Strategic Advantage II, Variable Survivorship, Estate Designer Policies, and Strategic Investor (Class A Policies), charges are made directly against the assets of the Account Divisions and are reflected daily in the computation of the unit values of the Divisions. A daily deduction, at an annual rate of 0.75% of the daily asset value of the Separate Account Divisions, is charged to the Account for mortality and expense risks assumed by the Company. |
|
For the Corporate Benefits, Strategic Benefits, and Asset Portfolio Manager Policies (Class B Policies), mortality and expense charges result in the redemption of units rather than a deduction in the daily computation of unit values. |
|
For Corporate Benefits Policies, a monthly deduction, at an annual rate of 0.20% of the Policyholder account value, is charged. For Strategic Benefits Policies, a monthly deduction, at an annual rate of 0.85%, 0.60%, and 0.50%, of the Policyholder account value, is charged during policy years 1 through 10, 11 through 20, and 21 and later, respectively. For Asset Portfolio Manager Policies, a monthly deduction, at an annual rate of 0.90% and 0.45% of the Policyholder account value, is charged during policy years 1 through 10 and 11 through 20, respectively. There is no mortality and expense charge after year 20 for Asset Portfolio Manager Policies. |
S-61 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
|
SEPARATE ACCOUNT L1 |
|
Notes to Financial Statements |
|
4. |
Related Party Transactions |
During the year ended December 31, 2004, management and service fees were paid indirectly to Direct Services, Inc., an affiliate of the Company, in its capacity as investment manager to ING Investors Trust. The Fund's advisory agreement provided for fees at annual rates ranging from 0.53% to 1.02% of the average net assets of each respective Portfolio. Management fees were paid to ING Investments, LLC, an affiliate of the Company, in its capacity as investment advisor to ING Variable Products Trust, ING Income Shares, and ING Variable Portfolios, Inc. The Fund's advisory agreement provides for fees at annual rates ranging from 0.35% to 0.75% of the average net assets of each respective Portfolio. Additionally, management fees were paid to ING Life Insurance and Annuity Company in its capacity as investment advisor to ING Partners, Inc. The Funds' advisory agreement provides for fees at annual rates of 0.90% of the average net assets of the ING Van Kampen Equity and Income Portfolio and 0 .55% of the average net assets of the ING Van Kampen Comstock Portfolio. |
S-62 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
|
SEPARATE ACCOUNT L1 |
|
Notes to Financial Statements |
|
5. |
Purchases and Sales of Investment Securities |
The aggregate cost of purchases and proceeds from sales of investments follow: |
Year ended December 31 |
|||||||||
2004 |
2003 |
||||||||
Purchases |
Sales |
Purchases |
Sales |
||||||
(Dollars in thousands) |
|||||||||
AIM Variable Insurance Funds: |
|||||||||
AIM V.I. Capital Appreciation |
$ 1,650 |
$ 1,483 |
$ 1,621 |
$ 2,033 |
|||||
AIM V.I. Core Stock |
2,665 |
7,081 |
4,773 |
5,692 |
|||||
AIM V.I. Government Securities |
4,951 |
10,498 |
9,856 |
13,637 |
|||||
AIM V.I. Health Sciences Fund |
2,965 |
2,358 |
520 |
123 |
|||||
AIM V.I. High Yield Fund |
37,916 |
11,557 |
- |
- |
|||||
AIM V.I. Small Company Growth |
2,081 |
2,834 |
5,044 |
6,862 |
|||||
AIM V.I. Total Return |
833 |
2,271 |
1,536 |
2,363 |
|||||
AIM V.I. Utilities |
4,455 |
4,188 |
5,195 |
4,368 |
|||||
Alger American Funds: |
|||||||||
Alger American Growth |
4,840 |
8,412 |
6,981 |
6,998 |
|||||
Alger American Leveraged AllCap |
3,404 |
3,771 |
3,899 |
3,491 |
|||||
Alger American Midcap Growth |
4,809 |
10,493 |
12,863 |
10,351 |
|||||
Alger American Small Capitalization |
11,110 |
31,863 |
11,574 |
9,773 |
|||||
American Funds Insurance Series: |
|||||||||
American Funds Growth |
14,665 |
541 |
3,698 |
20 |
|||||
American Funds Growth-Income |
10,811 |
1,658 |
3,542 |
337 |
|||||
American Funds International |
10,364 |
652 |
2,289 |
110 |
|||||
Fidelity® Variable Insurance Products Funds: |
|||||||||
Fidelity® VIP Asset Manager SM |
2,781 |
4,101 |
5,393 |
9,008 |
|||||
Fidelity® VIP Asset Manager SM SC |
799 |
247 |
496 |
131 |
|||||
Fidelity® VIP Growth |
7,951 |
13,674 |
10,724 |
12,102 |
|||||
Fidelity® VIP Growth SC |
1,597 |
911 |
1,285 |
208 |
|||||
Fidelity® VIP Index 500 |
15,753 |
214,070 |
32,715 |
30,359 |
|||||
Fidelity® VIP Money Market |
63,229 |
131,547 |
101,090 |
133,793 |
|||||
Fidelity® VIP Overseas |
8,062 |
10,595 |
46,550 |
45,671 |
|||||
Fidelity® VIP Overseas SC |
1,731 |
627 |
871 |
155 |
|||||
ING Income Shares: |
|||||||||
ING VP Bond |
5,530 |
2,021 |
7,339 |
4,316 |
|||||
ING Liquid Assets Portfolio |
109,422 |
51,366 |
- |
- |
|||||
ING JPMorgan Small Cap Equity Portfolio |
28,222 |
9,135 |
- |
- |
|||||
ING Stock Index Portfolio |
219,854 |
12,192 |
- |
- |
|||||
ING Legg Mason Value Portfolio |
1,508 |
29 |
- |
- |
|||||
ING Mercury Focus Value Portfolio |
34,564 |
7,265 |
- |
- |
|||||
ING Van Kampen Equity Growth Portfolio |
5,878 |
1,398 |
- |
- |
S-63 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Year ended December 31 |
|||||||||
2004 |
2003 |
||||||||
Purchases |
Sales |
Purchases |
Sales |
||||||
(Dollars in thousands) |
|||||||||
ING Investors Trust: |
|||||||||
ING Hard Assets |
$ 1,849 |
$ 532 |
$ 55 |
$ - |
|||||
ING Limited Maturity Bond |
1,131 |
158 |
184 |
54 |
|||||
ING Liquid Assets SC |
28,890 |
29,069 |
21,390 |
20,711 |
|||||
ING Marsico Growth |
2,330 |
1,376 |
2,365 |
603 |
|||||
ING MFS Mid Cap Growth |
2,202 |
1,374 |
2,731 |
1,884 |
|||||
ING MFS Total Return |
2,284 |
702 |
1,026 |
17 |
|||||
ING Oppenheimer Main Street |
16 |
22 |
2 |
1 |
|||||
ING T. Rowe Price Capital Appreciation |
9,402 |
2,519 |
9,506 |
2,366 |
|||||
ING T. Rowe Price Equity Income |
7,393 |
489 |
2,563 |
191 |
|||||
ING Partners, Inc.: |
|||||||||
ING JPMorgan Midcap Value |
4,975 |
410 |
1,200 |
132 |
|||||
ING PIMCO Total Return |
4,920 |
4,817 |
6,594 |
655 |
|||||
ING Salomon Brothers Aggressive Growth |
480 |
403 |
138 |
22 |
|||||
ING Salomon Brothers Investors |
939 |
204 |
153 |
6 |
|||||
ING Van Kampen Comstock |
4,452 |
1,298 |
3,135 |
940 |
|||||
ING Van Kampen Equity and Income |
1,287 |
606 |
130 |
17 |
|||||
ING Strategic Allocation Portfolios, Inc.: |
|||||||||
ING VP Strategic Allocation Balanced |
31 |
- |
- |
- |
|||||
ING VP Strategic Allocation Growth |
51 |
- |
- |
- |
|||||
ING VP Strategic Allocation Income |
42 |
- |
- |
- |
|||||
ING Variable Portfolios, Inc.: |
|||||||||
ING VP Index Plus Large Cap |
1,723 |
1,000 |
3,771 |
575 |
|||||
ING VP Index Plus Mid Cap |
6,080 |
1,926 |
3,754 |
597 |
|||||
ING VP Index Plus Small Cap |
3,599 |
837 |
1,927 |
254 |
|||||
ING Variable Products Trust: |
|||||||||
ING VP Growth Opportunities |
193 |
489 |
172 |
85 |
|||||
ING VP MagnaCap |
830 |
379 |
456 |
531 |
|||||
ING VP MidCap Opportunities |
1,588 |
715 |
1,332 |
1,159 |
|||||
ING VP SmallCap Opportunities |
8,871 |
8,169 |
3,361 |
2,542 |
|||||
INVESCO VIF-High Yield |
4,781 |
31,225 |
31,568 |
31,089 |
|||||
Janus Aspen Series: |
|||||||||
Janus Aspen Growth |
953 |
5,043 |
1,744 |
1,201 |
|||||
Janus Aspen International Growth |
4,065 |
4,707 |
4,551 |
3,939 |
|||||
Janus Aspen Mid Cap Growth |
794 |
493 |
760 |
706 |
|||||
Janus Aspen Worldwide Growth |
618 |
1,076 |
1,171 |
1,783 |
S-64 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Year ended December 31 |
|||||||||
2004 |
2003 |
||||||||
Purchases |
Sales |
Purchases |
Sales |
||||||
(Dollars in thousands) |
|||||||||
M Fund, Inc: |
|||||||||
Brandes International Equity |
$ 3,169 |
$ 1,392 |
$ 2,893 |
$ 3,181 |
|||||
Business Opportunity Value |
802 |
209 |
875 |
185 |
|||||
Clifton Enhanced US Equity |
- |
- |
258 |
2,393 |
|||||
Frontier Capital Appreciation |
3,010 |
2,593 |
3,236 |
2,899 |
|||||
Turner Core Growth |
1,673 |
810 |
1,101 |
486 |
|||||
Neuberger Berman Advisers Management Trust: |
|||||||||
Neuberger Berman AMT Growth |
1,336 |
4,387 |
4,474 |
2,692 |
|||||
Neuberger Berman AMT Limited Maturity Bond |
5,122 |
7,234 |
10,195 |
11,520 |
|||||
Neuberger Berman AMT Partners |
1,712 |
35,267 |
7,575 |
6,961 |
|||||
Pioneer Variable Contracts Trust: |
|||||||||
Pioneer Mid-Cap Value VCT |
10,957 |
4,130 |
7,385 |
2,201 |
|||||
Pioneer Small Cap Value VCT |
3,199 |
1,013 |
6,867 |
5,837 |
|||||
Putnam Variable Trust: |
|||||||||
Putnam VT Growth and Income |
2,173 |
907 |
2,314 |
3,595 |
|||||
Putnam VT New Opportunities |
6,650 |
4,480 |
242 |
251 |
|||||
Putnam VT Small Cap Value |
6,708 |
5,746 |
7,350 |
6,396 |
|||||
Putnam VT Voyager |
573 |
529 |
626 |
777 |
|||||
Van Eck Worldwide Insurance Trust: |
|||||||||
Van Eck Worldwide Bond |
3,216 |
3,280 |
5,046 |
4,172 |
|||||
Van Eck Worldwide Emerging Markets |
5,950 |
5,366 |
5,761 |
3,929 |
|||||
Van Eck Worldwide Hard Assets |
5,318 |
5,510 |
7,008 |
3,307 |
|||||
Van Eck Worldwide Real Estate |
5,069 |
2,943 |
2,690 |
2,552 |
S-65 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
|
SEPARATE ACCOUNT L1 |
|
Notes to Financial Statements |
|
6. |
Changes in Units |
The changes in units outstanding were as follows: |
Year ended December 31 |
|||||||||
2004 |
2003 |
||||||||
Net Increase |
Units |
Units |
Net Increase |
||||||
(Decrease) |
Issued |
Redeemed |
(Decrease) |
||||||
AIM Variable Insurance Funds: |
|||||||||
AIM V.I. Capital Appreciation |
31,754 |
276,577 |
(244,823) |
(31,717) |
|||||
AIM V.I. Core Stock |
(162,869) |
274,013 |
(436,882) |
(33,732) |
|||||
AIM V.I. Government Securities |
(476,381) |
508,780 |
(985,161) |
(331,976) |
|||||
AIM V.I. Health Sciences |
52,348 |
288,063 |
(235,715) |
44,260 |
|||||
AIM V.I. High Yield Fund |
2,577,611 |
3,837,136 |
(1,259,525) |
- |
|||||
AIM V.I. Small Company Growth |
(38,749) |
306,032 |
(344,781) |
(144,187) |
|||||
AIM V.I. Total Return |
(91,232) |
96,766 |
(187,998) |
(62,665) |
|||||
AIM V.I. Utilities |
24,329 |
461,572 |
(437,243) |
107,999 |
|||||
Alger American Funds: |
|||||||||
Alger American Growth |
(80,067) |
591,824 |
(671,891) |
135,320 |
|||||
Alger American Leveraged AllCap |
85,769 |
340,186 |
(254,417) |
48,184 |
|||||
Alger American MidCap Growth |
(81,879) |
493,625 |
(575,504) |
213,809 |
|||||
Alger American Small Capitalization |
(1,446,399) |
913,031 |
(2,359,430) |
248,657 |
|||||
American Funds Insurance Series: |
|||||||||
American Funds Growth |
1,056,233 |
1,200,423 |
(144,190) |
304,616 |
|||||
American Funds Growth-Income |
678,944 |
876,122 |
(197,178) |
267,800 |
|||||
American Funds International |
654,269 |
758,686 |
(104,417) |
173,690 |
|||||
Fidelity® Variable Insurance Products Funds: |
|||||||||
Fidelity® VIP Asset Manager SM |
(93,131) |
191,330 |
(284,461) |
(252,877) |
|||||
Fidelity® VIP Asset Manager SM SC |
47,911 |
79,981 |
(32,070) |
34,159 |
|||||
Fidelity® VIP Growth |
(222,145) |
603,249 |
(825,394) |
(23,426) |
|||||
Fidelity® VIP Growth SC |
88,553 |
237,816 |
(149,263) |
163,961 |
|||||
Fidelity® VIP Index 500 |
(9,436,441) |
1,389,188 |
(10,825,629) |
651,104 |
|||||
Fidelity® VIP Money Market |
(4,914,979) |
5,115,068 |
(10,030,047) |
(2,368,327) |
|||||
Fidelity® VIP Overseas |
(178,697) |
800,926 |
(979,623) |
127,738 |
|||||
Fidelity® VIP Overseas SC |
122,270 |
221,133 |
(98,863) |
95,278 |
|||||
ING Income Shares: |
|||||||||
ING VP Bond |
221,697 |
496,489 |
(274,792) |
270,092 |
|||||
ING Liquid Assets Portfolio |
5,782,515 |
11,569,986 |
(5,787,471) |
- |
|||||
ING JPMorgan Small Cap Equity Portfolio |
1,841,551 |
2,799,236 |
(957,685) |
- |
|||||
ING Stock Index Portfolio |
20,038,595 |
22,144,352 |
(2,105,757) |
- |
|||||
ING Legg Mason Value Portfolio |
145,993 |
149,780 |
(3,787) |
- |
|||||
ING Mercury Focus Value Portfolio |
2,531,675 |
3,312,315 |
(780,640) |
- |
|||||
ING Van Kampen Equity Growth Portfolio |
439,719 |
598,337 |
(158,618) |
- |
S-66 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Year ended December 31 |
|||||||||
2004 |
2003 |
||||||||
Net Increase |
Units |
Units |
Net Increase |
||||||
(Decrease) |
Issued |
Redeemed |
(Decrease) |
||||||
ING Investors Trust: |
|||||||||
ING Hard Assets |
92,227 |
137,713 |
(45,486) |
4,149 |
|||||
ING Limited Maturity Bond |
67,345 |
80,879 |
(13,534) |
9,681 |
|||||
ING Liquid Assets SC |
(32,726) |
4,695,648 |
(4,728,374) |
46,702 |
|||||
ING Marsico Growth |
101,820 |
290,477 |
(188,657) |
180,719 |
|||||
ING MFS Mid Cap Growth |
100,603 |
299,385 |
(198,782) |
103,975 |
|||||
ING MFS Total Return |
123,055 |
194,336 |
(71,281) |
85,768 |
|||||
ING Oppenheimer Main Street Portfolio |
(794) |
1,972 |
(2,766) |
159 |
|||||
ING T. Rowe Price Capital Appreciation |
456,050 |
829,881 |
(373,831) |
628,124 |
|||||
ING T. Rowe Price Equity Income |
515,160 |
602,874 |
(87,714) |
209,576 |
|||||
ING Partners, Inc.: |
|||||||||
ING JPMorgan Midcap Value |
313,223 |
365,739 |
(52,516) |
89,276 |
|||||
ING PIMCO Total Return |
11,508 |
516,489 |
(504,981) |
576,071 |
|||||
ING Salomon Brothers Aggressive Growth |
6,523 |
38,205 |
(31,682) |
9,585 |
|||||
ING Salomon Brothers Investors |
53,643 |
70,313 |
(16,670) |
12,372 |
|||||
ING Van Kampen Comstock |
280,475 |
451,478 |
(171,003) |
221,095 |
|||||
ING Van Kampen Equity and Income |
65,347 |
130,095 |
(64,748) |
12,521 |
|||||
ING Strategic Allocation Portfolio, Inc.: |
|||||||||
ING VP Strategic Allocation Balanced Portfolio |
2,880 |
2,881 |
(1) |
- |
|||||
ING VP Strategic Allocation Growth Portfolio |
3,819 |
3,821 |
(2) |
- |
|||||
ING VP Strategic Allocation Income Portfolio |
4,943 |
4,975 |
(32) |
- |
|||||
ING Variable Portfolios, Inc.: |
|||||||||
ING VP Index Plus Large Cap |
69,427 |
196,105 |
(126,678) |
373,301 |
|||||
ING VP Index Plus Mid Cap |
354,518 |
579,713 |
(225,195) |
327,236 |
|||||
ING VP Index Plus Small Cap |
223,257 |
328,838 |
(105,581) |
184,566 |
|||||
ING Variable Products Trust: |
|||||||||
ING VP Growth Opportunities |
(36,134) |
24,057 |
(60,191) |
14,018 |
|||||
ING VP MagnaCap |
43,917 |
89,161 |
(45,244) |
(6,046) |
|||||
ING VP MidCap Opportunities |
90,271 |
182,314 |
(92,043) |
23,300 |
|||||
ING VP SmallCap Opportunities |
81,507 |
1,243,261 |
(1,161,754) |
126,618 |
|||||
INVESCO VIF-High Yield |
(1,843,142) |
271,729 |
(2,114,871) |
(20,222) |
|||||
Janus Aspen Series: |
|||||||||
Janus Aspen Growth |
(680,742) |
205,302 |
(886,044) |
112,287 |
|||||
Janus Aspen International Growth |
(112,590) |
713,443 |
(826,033) |
132,985 |
|||||
Janus Aspen Mid Cap Growth |
73,876 |
234,562 |
(160,686) |
35,124 |
|||||
Janus Aspen Worldwide Growth |
(82,039) |
153,068 |
(235,107) |
(105,015) |
S-67 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Year ended December 31 |
|||||||||
2004 |
2003 |
||||||||
Net Increase |
Units |
Units |
Net Increase |
||||||
(Decrease) |
Issued |
Redeemed |
(Decrease) |
||||||
M Fund, Inc: |
|||||||||
Brandes International Equity |
92,155 |
230,443 |
(138,288) |
(8,769) |
|||||
Business Opportunity Value |
50,072 |
72,528 |
(22,456) |
86,388 |
|||||
Clifton Enhanced US Equity |
- |
- |
- |
(278,008) |
|||||
Frontier Capital Appreciation |
29,718 |
268,468 |
(238,750) |
56,601 |
|||||
Turner Core Growth |
93,043 |
196,134 |
(103,091) |
76,626 |
|||||
Neuberger Berman Advisers Management Trust: |
|||||||||
Neuberger Berman AMT Growth |
(144,211) |
180,643 |
(324,854) |
117,907 |
|||||
Neuberger Berman AMT Limited Maturity Bond |
(176,128) |
473,997 |
(650,125) |
(136,301) |
|||||
Neuberger Berman AMT Partners |
(1,403,036) |
152,463 |
(1,555,499) |
56,632 |
|||||
Pioneer Variable Contracts Trust: |
|||||||||
Pioneer Mid-Cap Value VCT |
540,518 |
958,603 |
(418,085) |
514,051 |
|||||
Pioneer Small Cap Value VCT |
198,034 |
315,688 |
(117,654) |
133,936 |
|||||
Putnam Variable Trust: |
|||||||||
Putnam VT Growth and Income |
116,224 |
250,655 |
(134,431) |
(131,784) |
|||||
Putnam VT New Opportunities |
247,112 |
767,548 |
(520,436) |
1,494 |
|||||
Putnam VT Small Cap Value |
51,460 |
583,241 |
(531,781) |
103,288 |
|||||
Putnam VT Voyager |
5,727 |
78,852 |
(73,125) |
(15,210) |
|||||
Van Eck Worldwide Insurance Trust: |
|||||||||
Van Eck Worldwide Bond |
(39,344) |
257,291 |
(296,635) |
65,283 |
|||||
Van Eck Worldwide Emerging Markets |
26,881 |
601,082 |
(574,201) |
190,357 |
|||||
Van Eck Worldwide Hard Assets |
(30,891) |
406,952 |
(437,843) |
312,284 |
|||||
Van Eck Worldwide Real Estate |
120,973 |
371,229 |
(250,256) |
3,160 |
S-68 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
7.Financial Highlights |
A summary of unit values and units outstanding for Policies, expense ratios, excluding expenses of underlying Funds, investment income ratios, and total return for the year ended December 31, 2004, 2003, 2002, and 2001, along with units outstanding and unit values for the year ended December 31, 2000, follows: |
Investment |
||||||||||||||||||
Units |
Unit Fair Value |
Net Assets |
Income |
Expense Ratio B |
Total Return C |
|||||||||||||
Division |
(000's) |
(lowest to highest) |
(000's) |
Ratio A |
(lowest to highest) |
(lowest to highest) |
||||||||||||
AIM V.I. Capital Appreciation |
||||||||||||||||||
2004 |
1,078 |
$9.71 to $11.27 |
$ 11,882 |
- |
% |
0.00% to 0.75% |
5.82% to 6.59% |
|||||||||||
2003 |
1,047 |
$9.11 to $10.65 |
10,989 |
- |
0.00% to 0.75% |
28.47% to 29.59% |
||||||||||||
2002 |
1,078 |
$7.03 to $8.29 |
8,853 |
- |
0.00% to 0.75% |
-25.05% to -24.41% |
||||||||||||
2001 |
1,174 |
$9.30 to $11.06 |
12,831 |
7.26 |
0.00% to 0.75% |
-23.83% to -23.27% |
||||||||||||
2000 |
4,082 |
$12.12 to $14.52 |
51,039 |
(a) |
(a) |
(a) |
||||||||||||
AIM V.I. Core Stock |
||||||||||||||||||
2004 |
1,104 |
$10.15 to $24.82 |
23,377 |
0.79 |
0.00% to 0.75% |
3.46% to 4.21% |
||||||||||||
2003 |
1,267 |
$9.74 to $23.99 |
27,110 |
1.14 |
0.00% to 0.75% |
21.65% to 22.52% |
||||||||||||
2002 |
1,301 |
$7.95 to $19.72 |
23,265 |
1.41 |
0.00% to 0.75% |
-19.64% to -19.04% |
||||||||||||
2001 |
1,238 |
$9.82 to $24.54 |
29,102 |
1.59 |
0.00% to 0.75% |
-9.75% to -8.99% |
||||||||||||
2000 |
806 |
$10.79 to $27.19 |
21,536 |
(a) |
(a) |
(a) |
||||||||||||
AIM V.I. Government Securities |
||||||||||||||||||
2004 |
1,812 |
$13.24 to $13.45 |
24,056 |
3.32 |
0.00% to 0.75% |
1.77% to 2.59% |
||||||||||||
2003 |
2,288 |
$13.01 to $13.11 |
29,800 |
2.30 |
0.00% to 0.75% |
0.31% to 1.00% |
||||||||||||
2002 |
2,620 |
$12.97 to $12.98 |
33,988 |
2.03 |
0.00% to 0.75% |
9.08% to 9.82% |
||||||||||||
2001 |
2,156 |
$11.81 to $11.90 |
25,665 |
1.35 |
0.00% to 0.75% |
5.40% to 6.11% |
||||||||||||
2000 |
1,492 |
$11.13 to $11.29 |
16,764 |
(a) |
(a) |
(a) |
||||||||||||
AIM V.I. Health Sciences |
||||||||||||||||||
2004 |
113 |
$11.07 to $11.30 |
1,261 |
- |
0.00% to 0.75% |
6.75% to 7.62% |
||||||||||||
2003 |
61 |
$10.37 to $10.50 |
631 |
- |
0.00% to 0.75% |
26.93% to 27.74% |
||||||||||||
2002 |
16 |
$8.17 to $8.22 |
134 |
(c) |
0.00% to 0.75% |
(c) |
||||||||||||
2001 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
2000 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
S-69 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Investment |
||||||||||||||||||
Units |
Unit Fair Value |
Net Assets |
Income |
Expense Ratio B |
Total Return C |
|||||||||||||
Division |
(000's) |
(lowest to highest) |
(000's) |
Ratio A |
(lowest to highest) |
(lowest to highest) |
||||||||||||
AIM V.I. High Yield |
||||||||||||||||||
2004 |
2,578 |
$10.82 to $10.87 |
$ 27,903 |
(e) |
% |
0.00% to 0.75% |
(e) |
|||||||||||
2003 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2002 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2001 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2000 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
AIM V.I. Small Company Growth |
||||||||||||||||||
2004 |
1,062 |
$11.28 to $14.69 |
15,001 |
- |
0.00% to 0.75% |
13.09% to 13.94% |
||||||||||||
2003 |
1,101 |
$9.90 to $12.99 |
13,864 |
- |
0.00% to 0.75% |
32.42% to 33.42% |
||||||||||||
2002 |
1,245 |
$7.42 to $9.81 |
12,029 |
- |
0.00% to 0.75% |
-32.30% to -31.11% |
||||||||||||
2001 |
1,033 |
$10.77 to $14.49 |
14,861 |
- |
0.00% to 0.75% |
-19.32% to -18.53% |
||||||||||||
2000 |
660 |
$13.22 to $17.96 |
11,848 |
(a) |
(a) |
(a) |
||||||||||||
AIM V.I. Total Return |
||||||||||||||||||
2004 |
548 |
$10.86 to $17.44 |
9,177 |
1.58 |
0.00% to 0.75% |
2.95% to 3.72% |
||||||||||||
2003 |
639 |
$10.47 to $16.94 |
10,471 |
2.47 |
0.00% to 0.75% |
16.11% to 16.98% |
||||||||||||
2002 |
702 |
$8.95 to $14.59 |
9,980 |
2.00 |
0.00% to 0.75% |
-10.98% to -10.23% |
||||||||||||
2001 |
934 |
$9.97 to $16.39 |
15,247 |
2.57 |
0.00% to 0.75% |
-2.15% |
||||||||||||
2000 |
698 |
$16.75 |
11,695 |
(a) |
(a) |
(a) |
||||||||||||
AIM V.I. Utilities |
||||||||||||||||||
2004 |
717 |
$8.15 to $17.33 |
11,139 |
2.02 |
0.00% to 0.75% |
22.65% to 23.48% |
||||||||||||
2003 |
693 |
$6.60 to $14.13 |
8,951 |
1.23 |
0.00% to 0.75% |
16.58% to 17.44% |
||||||||||||
2002 |
585 |
$5.62 to $12.12 |
6,946 |
0.49 |
0.00% to 0.75% |
-20.94% to -20.28% |
||||||||||||
2001 |
526 |
$7.05 to $15.33 |
7,928 |
1.02 |
0.00% to 0.75% |
-32.91% |
||||||||||||
2000 |
342 |
$22.85 |
7,812 |
(a) |
(a) |
(a) |
||||||||||||
Alger American Growth |
||||||||||||||||||
2004 |
2,181 |
$8.56 to $22.76 |
43,063 |
- |
0.00% to 0.75% |
4.69% to 5.42% |
||||||||||||
2003 |
2,261 |
$8.12 to $21.74 |
44,540 |
- |
0.00% to 0.75% |
34.11% to 35.11% |
||||||||||||
2002 |
2,126 |
$6.01 to $16.21 |
33,021 |
0.04 |
0.00% to 0.75% |
-33.35% to -33.07% |
||||||||||||
2001 |
2,053 |
$8.98 to $24.32 |
48,752 |
12.91 |
0.00% to 0.75% |
-12.74% to -11.61% |
||||||||||||
2000 |
1,807 |
$10.16 to $27.87 |
50,118 |
(a) |
(a) |
(a) |
S-70 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Investment |
||||||||||||||||||
Units |
Unit Fair Value |
Net Assets |
Income |
Expense Ratio B |
Total Return C |
|||||||||||||
Division |
(000's) |
(lowest to highest) |
(000's) |
Ratio A |
(lowest to highest) |
(lowest to highest) |
||||||||||||
Alger American Leveraged AllCap |
||||||||||||||||||
2004 |
788 |
$9.10 to $31.80 |
$ 19,364 |
- |
% |
0.00% to 0.75% |
7.40% to 8.20% |
|||||||||||
2003 |
702 |
$8.41 to $29.61 |
18,180 |
- |
0.00% to 0.75% |
33.68% to 34.78% |
||||||||||||
2002 |
654 |
$6.24 to $22.15 |
13,112 |
0.01 |
0.00% to 0.75% |
-34.62% to -33.97% |
||||||||||||
2001 |
696 |
$9.45 to $33.88 |
23,276 |
3.72 |
0.00% to 0.75% |
-16.30% |
||||||||||||
2000 |
602 |
$40.48 |
24,378 |
(a) |
(a) |
(a) |
||||||||||||
Alger American MidCap Growth |
||||||||||||||||||
2004 |
1,542 |
$14.77 to $34.68 |
43,568 |
- |
0.00% to 0.75% |
12.20% to 13.01% |
||||||||||||
2003 |
1,624 |
$13.07 to $30.91 |
43,924 |
- |
0.00% to 0.75% |
46.70% to 47.85% |
||||||||||||
2002 |
1,410 |
$8.84 to $21.07 |
27,448 |
- |
0.00% to 0.75% |
-30.25% to -29.67% |
||||||||||||
2001 |
1,445 |
$12.57 to $30.21 |
42,563 |
46.27 |
0.00% to 0.75% |
-7.2% to -6.40% |
||||||||||||
2000 |
1,028 |
$13.43 to $32.49 |
33,294 |
(a) |
(a) |
(a) |
||||||||||||
American Funds Growth |
||||||||||||||||||
2004 |
1,361 |
$14.38 to $14.56 |
19,658 |
0.24 |
0.00% to 0.75% |
11.65% to 12.43% |
||||||||||||
2003 |
305 |
$12.88 to $12.95 |
3,929 |
(d) |
0.00% to 0.75% |
(d) |
||||||||||||
2002 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2001 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2000 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
American Funds Growth-Income |
||||||||||||||||||
2004 |
947 |
$14.14 to $14.32 |
13,451 |
1.19 |
0.00% to 0.75% |
9.53% to 10.32% |
||||||||||||
2003 |
268 |
$12.91 to $12.98 |
3,463 |
(d) |
0.00% to 0.75% |
(d) |
||||||||||||
2002 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2001 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2000 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
American Funds International |
||||||||||||||||||
2004 |
828 |
$16.41 to $16.62 |
13,661 |
1.90 |
0.00% to 0.75% |
18.40% to 19.31% |
||||||||||||
2003 |
174 |
$13.86 to $13.93 |
2,412 |
(d) |
0.00% to 0.75% |
(d) |
||||||||||||
2002 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2001 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2000 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
S-71 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Investment |
||||||||||||||||||
Units |
Unit Fair Value |
Net Assets |
Income |
Expense Ratio B |
Total Return C |
|||||||||||||
Division |
(000's) |
(lowest to highest) |
(000's) |
Ratio A |
(lowest to highest) |
(lowest to highest) |
||||||||||||
Fidelity® VIP Asset Manager SM |
||||||||||||||||||
2004 |
1,067 |
$18.95 |
$ 20,212 |
2.64 |
% |
0.75% |
4.64% |
|||||||||||
2003 |
1,160 |
$18.11 |
21,003 |
3.58 |
0.75% |
17.14% |
||||||||||||
2002 |
1,413 |
$15.46 |
21,839 |
3.51 |
0.75% |
-8.90% |
||||||||||||
2001 |
1,201 |
$16.97 |
19,842 |
4.74 |
0.75% |
-5.35% |
||||||||||||
2000 |
879 |
$17.93 |
15,755 |
(a) |
(a) |
(a) |
||||||||||||
Fidelity® VIP Asset Manager SM SC |
||||||||||||||||||
2004 |
147 |
$11.21 |
1,650 |
2.51 |
0.00% |
5.36% |
||||||||||||
2003 |
99 |
$10.64 |
1,056 |
2.80 |
0.00% |
17.83% |
||||||||||||
2002 |
65 |
$9.03 |
588 |
2.94 |
0.00% |
-8.79% |
||||||||||||
2001 |
32 |
$9.90 |
314 |
(b) |
0.00% |
(b) |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
||||||||||||
Fidelity® VIP Growth |
||||||||||||||||||
2004 |
2,162 |
$8.57 to $23.51 |
49,347 |
0.26 |
0.00% to 0.75% |
2.57% to 3.38% |
||||||||||||
2003 |
2,384 |
$8.29 to $22.92 |
53,751 |
0.25 |
0.00% to 0.75% |
31.88% to 32.85% |
||||||||||||
2002 |
2,408 |
$6.24 to $17.38 |
41,408 |
0.24 |
0.00% to 0.75% |
-30.40% to -30.12% |
||||||||||||
2001 |
2,444 |
$8.93 to $24.97 |
59,751 |
7.38 |
0.00% to 0.75% |
-18.45% to -17.62% |
||||||||||||
2000 |
2,264 |
$10.84 to $30.62 |
68,506 |
(a) |
(a) |
(a) |
||||||||||||
Fidelity® VIP Growth SC |
||||||||||||||||||
2004 |
341 |
$8.17 |
2,789 |
0.17 |
0.00% |
3.29% |
||||||||||||
2003 |
253 |
$7.91 |
2,000 |
0.08 |
0.00% |
32.72% |
||||||||||||
2002 |
88 |
$5.96 |
530 |
0.08 |
0.00% |
-30.54% |
||||||||||||
2001 |
24 |
$8.58 |
209 |
(b) |
0.00% |
(b) |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
||||||||||||
Fidelity® VIP Overseas |
||||||||||||||||||
2004 |
2,496 |
$10.62 to $16.26 |
40,032 |
1.14 |
0.00% to 0.75% |
12.84% to 13.58% |
||||||||||||
2003 |
2,675 |
$9.35 to $14.41 |
38,294 |
0.72 |
0.00% to 0.75% |
42.25% to 43.40% |
||||||||||||
2002 |
2,547 |
$6.52 to $10.13 |
25,636 |
0.78 |
0.00% to 0.75% |
-21.23% to -20.29% |
||||||||||||
2001 |
2,775 |
$8.18 to $12.86 |
35,065 |
13.45 |
0.00% to 0.75% |
-21.63% to -21.19% |
||||||||||||
2000 |
2,670 |
$10.38 to $16.41 |
43,322 |
(a) |
(a) |
(a) |
S-72 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Investment |
||||||||||||||||||
Units |
Unit Fair Value |
Net Assets |
Income |
Expense Ratio B |
Total Return C |
|||||||||||||
Division |
(000's) |
(lowest to highest) |
(000's) |
Ratio A |
(lowest to highest) |
(lowest to highest) |
||||||||||||
Fidelity® VIP Overseas SC |
||||||||||||||||||
2004 |
311 |
$9.87 |
$ 3,069 |
0.81 |
% |
0.00% |
13.45% |
|||||||||||
2003 |
189 |
$8.70 |
1,641 |
0.45 |
0.00% |
43.09% |
||||||||||||
2002 |
93 |
$6.08 |
568 |
0.34 |
0.00% |
-20.32% |
||||||||||||
2001 |
19 |
$7.63 |
151 |
(b) |
0.00% |
(b) |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
||||||||||||
ING VP Bond |
||||||||||||||||||
2004 |
727 |
$11.84 to $12.09 |
8,705 |
8.27 |
0.00% to 0.75% |
4.04% to 4.95% |
||||||||||||
2003 |
505 |
$11.38 to $11.52 |
5,775 |
1.88 |
0.00% to 0.75% |
5.57% to 6.27% |
||||||||||||
2002 |
235 |
$10.78 to $10.84 |
2,539 |
(c) |
0.00% to 0.75% |
(c) |
||||||||||||
2001 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
2000 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
ING Liquid Assets |
||||||||||||||||||
2004 |
5,783 |
$10.04 |
58,056 |
1.79 |
0.75% |
0% |
||||||||||||
2003 |
1,827 |
$11.49 |
20,993 |
0.78 |
0.00% |
0.70% |
||||||||||||
2002 |
1,780 |
$11.41 |
20,314 |
1.47 |
0.00% |
1.42% |
||||||||||||
2001 |
696 |
$11.25 |
7,832 |
3.74 |
0.00% |
3.88% |
||||||||||||
2000 |
184 |
$10.83 |
1,992 |
(a) |
(a) |
(a) |
||||||||||||
ING JP Morgan Small Cap Equity |
||||||||||||||||||
2004 |
1,842 |
$12.03 to $12.09 |
22,159 |
(e) |
0.00% to 0.75% |
(e) |
||||||||||||
2003 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2002 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2001 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2000 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
ING Stock Index |
||||||||||||||||||
2004 |
20,039 |
$11.00 to $11.05 |
220,550 |
(e) |
0.00% to 0.75% |
(e) |
||||||||||||
2003 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2002 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2001 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2000 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
S-73 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Investment |
||||||||||||||||||
Units |
Unit Fair Value |
Net Assets |
Income |
Expense Ratio B |
Total Return C |
|||||||||||||
Division |
(000's) |
(lowest to highest) |
(000's) |
Ratio A |
(lowest to highest) |
(lowest to highest) |
||||||||||||
ING Legg Mason Value |
||||||||||||||||||
2004 |
146 |
$11.36 to $11.42 |
$ 1,660 |
(e) |
% |
0.00% to 0.75% |
(e) |
|||||||||||
2003 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2002 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2001 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2000 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
ING Mercury Focus Value |
||||||||||||||||||
2004 |
2,532 |
$10.99 to $11.04 |
27,830 |
(e) |
0.00% to 0.75% |
(e) |
||||||||||||
2003 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2002 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2001 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2000 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
ING Van Kampen Equity Growth |
||||||||||||||||||
2004 |
440 |
$10.68 to $10.73 |
4,704 |
(e) |
0.00% to 0.75% |
(e) |
||||||||||||
2003 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2002 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2001 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2000 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
ING Hard Assets |
||||||||||||||||||
2004 |
96 |
$13.99 to $16.36 |
1,428 |
1.75 |
0.00% to 0.75% |
5.89% to 6.71% |
||||||||||||
2003 |
4 |
$13.11 to $15.45 |
61 |
(d) |
0.00% to 0.75% |
(d) |
||||||||||||
2002 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2001 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2000 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
ING Limited Maturity Bond |
||||||||||||||||||
2004 |
103 |
$13.26 |
1,365 |
7.76 |
0.00% |
1.38% |
||||||||||||
2003 |
36 |
$13.08 |
465 |
1.26 |
0.00% |
2.83% |
||||||||||||
2002 |
26 |
$12.72 |
329 |
0.23 |
0.00% |
7.25% |
||||||||||||
2001 |
4,610 |
$11.86 |
54,671 |
16.29 |
0.00% |
8.91% |
||||||||||||
2000 |
80 |
$10.89 |
877 |
(a) |
(a) |
(a) |
S-74 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Investment |
||||||||||||||||||
Units |
Unit Fair Value |
Net Assets |
Income |
Expense Ratio B |
Total Return C |
|||||||||||||
Division |
(000's) |
(lowest to highest) |
(000's) |
Ratio A |
(lowest to highest) |
(lowest to highest) |
||||||||||||
ING Liquid Assets SC |
||||||||||||||||||
2004 |
1,794 |
$11.60 |
$ 20,814 |
(e) |
0.00% |
(e) |
||||||||||||
2003 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2002 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2001 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2000 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
ING Marsico Growth |
||||||||||||||||||
2004 |
283 |
$8.76 to $14.31 |
3,205 |
- |
0.00% to 0.75% |
11.97% to 12.89% |
||||||||||||
2003 |
182 |
$7.76 to $12.78 |
1,870 |
- |
0.00% to 0.75% |
32.88% |
||||||||||||
2002 |
1 |
$5.84 |
5 |
- |
0.00% |
-29.55% |
||||||||||||
2001 |
- |
$8.29 |
4 |
- |
0.00% |
-30.28% |
||||||||||||
2000 |
- |
$11.89 |
1 |
(a) |
(a) |
(a) |
||||||||||||
ING MFS Mid Cap Growth |
||||||||||||||||||
2004 |
482 |
$7.77 to $10.74 |
4,257 |
- |
0.00% to 0.75% |
14.43% to 15.36% |
||||||||||||
2003 |
381 |
$6.79 to $9.31 |
2,923 |
- |
0.00% to 0.75% |
38.57% to 39.58% |
||||||||||||
2002 |
277 |
$4.90 to $6.67 |
1,478 |
- |
0.00% to 0.75% |
-49.38% to -48.85% |
||||||||||||
2001 |
46 |
$9.68 to $13.04 |
465 |
(b) |
0.00% to 0.75% |
(b) |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
||||||||||||
ING MFS Total Return |
||||||||||||||||||
2004 |
223 |
$12.80 to $14.41 |
3,023 |
2.53 |
0.00% to 0.75% |
10.63% to 11.45% |
||||||||||||
2003 |
99 |
$11.57 to $12.93 |
1,246 |
1.00 |
0.00% to 0.75% |
16.91% |
||||||||||||
2002 |
14 |
$11.06 |
151 |
3.30 |
0.00% |
-5.06% |
||||||||||||
2001 |
5 |
$11.65 |
53 |
13.37 |
0.00% |
0.43% |
||||||||||||
2000 |
1 |
$11.60 |
11 |
(a) |
(a) |
(a) |
||||||||||||
ING T. Rowe Price Capital Appreciation |
||||||||||||||||||
2004 |
2,142 |
$15.27 to $15.71 |
33,001 |
1.32 |
0.00% to 0.75% |
16.03% to 16.98% |
||||||||||||
2003 |
1,686 |
$13.16 to $13.43 |
22,308 |
0.73 |
0.00% to 0.75% |
24.39% to 25.28% |
||||||||||||
2002 |
1,058 |
$10.58 to $10.72 |
11,222 |
3.65 |
0.00% to 0.75% |
-0.19% to 0.56% |
||||||||||||
2001 |
369 |
$10.60 to $10.66 |
3,909 |
9.39 |
0.00% to 0.75% |
- |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
S-75 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Investment |
||||||||||||||||||
Units |
Unit Fair Value |
Net Assets |
Income |
Expense Ratio B |
Total Return C |
|||||||||||||
Division |
(000's) |
(lowest to highest) |
(000's) |
Ratio A |
(lowest to highest) |
(lowest to highest) |
||||||||||||
ING T. Rowe Price Equity Income |
||||||||||||||||||
2004 |
735 |
$13.48 to $14.50 |
$ 10,480 |
1.45 |
% |
0.00% to 0.75% |
14.17% to 15.12% |
|||||||||||
2003 |
220 |
$11.71 to $12.70 |
2,734 |
0.85 |
0.00% to 0.75% |
25.37% |
||||||||||||
2002 |
11 |
$9.34 |
99 |
4.45 |
0% |
-13.20% |
||||||||||||
2001 |
1 |
$10.76 |
6 |
(b) |
0% |
(b) |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
||||||||||||
ING JPMorgan Mid Cap Value |
||||||||||||||||||
2004 |
402 |
$15.27 to $15.47 |
6,176 |
0.46 |
0.00% to 0.75% |
19.95% to 20.86% |
||||||||||||
2003 |
89 |
$12.73 to $12.80 |
1,139 |
(d) |
0.00% to 0.75% |
(d) |
||||||||||||
2002 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2001 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2000 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
ING PIMCO Total Return |
||||||||||||||||||
2004 |
588 |
$10.60 to $10.73 |
6,250 |
- |
0.00% to 0.75% |
3.82% to 4.58% |
||||||||||||
2003 |
576 |
$10.21 to $10.26 |
5,884 |
(d) |
0.00% to 0.75% |
(d) |
||||||||||||
2002 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2001 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2000 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
ING Salomon Brothers Aggressive Growth |
||||||||||||||||||
2004 |
16 |
$13.90 to $14.08 |
226 |
- |
0.00% to 0.75% |
8.85% to 9.74% |
||||||||||||
2003 |
10 |
$12.77 to $12.83 |
123 |
- |
0.00% to 0.75% |
(d) |
||||||||||||
2002 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2001 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2000 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
ING Salomon Brothers Investors |
||||||||||||||||||
2004 |
66 |
$14.25 to $14.43 |
942 |
1.27 |
0.00% to 0.75% |
9.45% to 10.24% |
||||||||||||
2003 |
12 |
$13.02 to $13.09 |
161 |
(d) |
0.00% to 0.75% |
(d) |
||||||||||||
2002 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2001 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
||||||||||||
2000 |
(d) |
(d) |
(d) |
(d) |
(d) |
(d) |
S-76 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Investment |
||||||||||||||||||
Units |
Unit Fair Value |
Net Assets |
Income |
Expense Ratio B |
Total Return C |
|||||||||||||
Division |
(000's) |
(lowest to highest) |
(000's) |
Ratio A |
(lowest to highest) |
(lowest to highest) |
||||||||||||
ING Van Kampen Comstock |
||||||||||||||||||
2004 |
653 |
$12.50 to $12.76 |
$ 8,237 |
- |
% |
0.00% to 0.75% |
15.96% to 16.96% |
|||||||||||
2003 |
372 |
$10.78 to $10.91 |
4,034 |
3.47 |
0.00% to 0.75% |
28.95% to 29.88% |
||||||||||||
2002 |
151 |
$8.36 to $8.40 |
1,265 |
(c) |
0.00% to 0.75% |
(c) |
||||||||||||
2001 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
2000 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
ING Van Kampen Equity and Income |
||||||||||||||||||
2004 |
80 |
$10.83 to $11.06 |
877 |
0.78 |
0.00% to 0.75% |
9.95% to 10.93% |
||||||||||||
2003 |
14 |
$9.85 to $9.97 |
143 |
- |
0.00% to 0.75% |
26.44% to 27.33% |
||||||||||||
2002 |
2 |
$7.79 to $7.83 |
15 |
(c) |
0.00% to 0.75% |
(c) |
||||||||||||
2001 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
2000 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
ING VP Strategic Allocation Balanced Portfolio |
||||||||||||||||||
2004 |
3 |
$10.75 to $10.77 |
31 |
(e) |
0.00% to 0.75% |
(e) |
||||||||||||
2003 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2002 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2001 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2000 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
ING VP Strategic Allocation Growth Portfolio |
||||||||||||||||||
2004 |
4 |
$10.98 to $11.00 |
42 |
(e) |
0.00% to 0.75% |
(e) |
||||||||||||
2003 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2002 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2001 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2000 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
ING VP Strategic Allocation Income Portfolio |
||||||||||||||||||
2004 |
5 |
$10.48 to $10.50 |
52 |
(e) |
0.00% to 0.75% |
(e) |
||||||||||||
2003 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2002 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2001 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
||||||||||||
2000 |
(e) |
(e) |
(e) |
(e) |
(e) |
(e) |
S-77 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Investment |
||||||||||||||||||
Units |
Unit Fair Value |
Net Assets |
Income |
Expense Ratio B |
Total Return C |
|||||||||||||
Division |
(000's) |
(lowest to highest) |
(000's) |
Ratio A |
(lowest to highest) |
(lowest to highest) |
||||||||||||
ING VP Index Plus Large Cap |
||||||||||||||||||
2004 |
491 |
$10.92 to $11.15 |
$ 5,418 |
1.00 |
% |
0.00% to 0.75% |
9.75% to 10.62% |
|||||||||||
2003 |
422 |
$9.95 to $10.08 |
4,224 |
1.39 |
0.00% to 0.75% |
25.16% to 26.16% |
||||||||||||
2002 |
49 |
$7.95 to $7.99 |
389 |
(c) |
0.00% to 0.75% |
(c) |
||||||||||||
2001 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
2000 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
ING VP Index Plus Mid Cap |
||||||||||||||||||
2004 |
1,067 |
$12.57 to $12.83 |
13,569 |
0.44 |
0.00% to 0.75% |
15.64% to 16.53% |
||||||||||||
2003 |
712 |
$10.87 to $11.01 |
7,802 |
0.40 |
0.00% to 0.75% |
31.44% to 32.49% |
||||||||||||
2002 |
385 |
$8.27 to $8.31 |
3,193 |
(c) |
0.00% to 0.75% |
(c) |
||||||||||||
2001 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
2000 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
ING VP Index Plus Small Cap |
||||||||||||||||||
2004 |
485 |
$13.39 to $13.67 |
6,535 |
0.13 |
0.00% to 0.75% |
21.18% to 22.05% |
||||||||||||
2003 |
261 |
$11.05 to $11.20 |
2,906 |
0.17 |
0.00% to 0.75% |
35.09% to 36.09% |
||||||||||||
2002 |
77 |
$8.18 to $8.23 |
630 |
(c) |
0.00% to 0.75% |
(c) |
||||||||||||
2001 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
2000 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
ING VP MagnaCap |
||||||||||||||||||
2004 |
175 |
$10.51 to $10.81 |
1,851 |
1.53 |
0.00% to 0.75% |
8.24% to 8.97% |
||||||||||||
2003 |
131 |
$9.71 to $9.92 |
1,281 |
1.21 |
0.00% to 0.75% |
29.99% to 31.04% |
||||||||||||
2002 |
137 |
$7.47 to $7.57 |
1,026 |
1.31 |
0.00% to 0.75% |
-23.46% to -22.76% |
||||||||||||
2001 |
21 |
$9.76 to $9.80 |
202 |
(b) |
0.00% to 0.75% |
(b) |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
||||||||||||
ING VP MidCap Opportunities |
||||||||||||||||||
2004 |
242 |
$10.09 to $10.38 |
2,482 |
- |
0.00% to 0.75% |
10.64% to 11.49% |
||||||||||||
2003 |
152 |
$9.12 to $9.31 |
1,404 |
- |
0.00% to 0.75% |
35.71% to 36.71% |
||||||||||||
2002 |
128 |
$6.72 to $6.81 |
868 |
- |
0.00% to 0.75% |
-26.80% to -25.82% |
||||||||||||
2001 |
32 |
$9.18 |
294 |
(b) |
0.00% to 0.75% |
(b) |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
S-78 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Investment |
||||||||||||||||||
Units |
Unit Fair Value |
Net Assets |
Income |
Expense Ratio B |
Total Return C |
|||||||||||||
Division |
(000's) |
(lowest to highest) |
(000's) |
Ratio A |
(lowest to highest) |
(lowest to highest) |
||||||||||||
ING VP SmallCap Opportunities |
||||||||||||||||||
2004 |
447 |
$8.16 to $8.39 |
$ 3,678 |
- |
% |
0.00% to 0.75% |
9.38% to 10.10% |
|||||||||||
2003 |
365 |
$7.46 to $7.62 |
2,743 |
- |
0.00% to 0.75% |
37.64% to 38.80% |
||||||||||||
2002 |
238 |
$5.42 to $5.49 |
1,297 |
- |
0.00% to 0.75% |
-44.07% to -43.63% |
||||||||||||
2001 |
75 |
$9.69 to $9.74 |
730 |
(b) |
0.00% to 0.75% |
(b) |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
||||||||||||
Janus Aspen International Growth |
||||||||||||||||||
2004 |
937 |
$7.66 to $7.91 |
7,268 |
0.79 |
0.00% to 0.75% |
17.85% to 18.77% |
||||||||||||
2003 |
1,050 |
$6.50 to $6.66 |
6,883 |
1.07 |
0.00% to 0.75% |
33.47% to 34.55% |
||||||||||||
2002 |
917 |
$4.87 to $4.95 |
4,484 |
0.64 |
0.00% to 0.75% |
-26.10% to -25.79% |
||||||||||||
2001 |
780 |
$6.59 to $6.67 |
5,140 |
0.87 |
0.00% to 0.75% |
-24.17% to -23.42% |
||||||||||||
2000 |
48 |
$8.69 to $8.71 |
421 |
(a) |
(a) |
(a) |
||||||||||||
Janus Aspen Mid Cap Growth |
||||||||||||||||||
2004 |
634 |
$4.69 to $4.84 |
2,988 |
- |
0.00% to 0.75% |
19.64% to 20.40% |
||||||||||||
2003 |
560 |
$3.92 to $4.02 |
2,203 |
- |
0.00% to 0.75% |
33.79% to 34.90% |
||||||||||||
2002 |
525 |
$2.93 to $2.98 |
1,539 |
- |
0.00% to 0.75% |
-28.71% to -28.19% |
||||||||||||
2001 |
452 |
$4.11 to $4.15 |
1,858 |
- |
0.00% to 0.75% |
-40.00% to -39.50% |
||||||||||||
2000 |
77 |
$6.85 to $6.86 |
526 |
(a) |
(a) |
(a) |
||||||||||||
Janus Aspen Worldwide Growth |
||||||||||||||||||
2004 |
544 |
$6.27 to $6.47 |
3,449 |
0.85 |
0.00% to 0.75% |
3.81% to 4.52% |
||||||||||||
2003 |
626 |
$6.04 to $6.19 |
3,806 |
0.92 |
0.00% to 0.75% |
22.76% to 23.55% |
||||||||||||
2002 |
731 |
$4.92 to $5.01 |
3,609 |
0.66 |
0.00% to 0.75% |
-26.35% to -25.67% |
||||||||||||
2001 |
484 |
$6.68 to $6.74 |
3,325 |
0.37 |
0.00% to 0.75% |
-23.13% to -22.62% |
||||||||||||
2000 |
37 |
$8.69 to $8.71 |
319 |
(a) |
(a) |
(a) |
||||||||||||
Brandes International Equity |
||||||||||||||||||
2004 |
806 |
$14.36 to $14.77 |
11,581 |
1.20 |
0.00% to 0.75% |
23.05% to 24.01% |
||||||||||||
2003 |
713 |
$11.67 to $11.91 |
8,330 |
1.05 |
0.00% to 0.75% |
46.42% to 47.40% |
||||||||||||
2002 |
722 |
$7.97 to $8.08 |
5,757 |
6.53 |
0.00% to 0.75% |
-15.93% to -15.30% |
||||||||||||
2001 |
200 |
$9.48 to $9.54 |
1,895 |
(b) |
0.00% to 0.75% |
(b) |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
S-79 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Investment |
||||||||||||||||||
Units |
Unit Fair Value |
Net Assets |
Income |
Expense Ratio B |
Total Return C |
|||||||||||||
Division |
(000's) |
(lowest to highest) |
(000's) |
Ratio A |
(lowest to highest) |
(lowest to highest) |
||||||||||||
Business Opportunity Value |
||||||||||||||||||
2004 |
163 |
$11.89 to $12.14 |
$1,943 |
0.66 |
% |
0.00% to 0.75% |
21.70% to 22.63% |
|||||||||||
2003 |
113 |
$9.77 to $9.90 |
1,103 |
1.07 |
0.00% to 0.75% |
28.72% to 29.58% |
||||||||||||
2002 |
26 |
$7.59 to $7.64 |
200 |
(c) |
0.00% to 0.75% |
(c) |
||||||||||||
2001 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
2000 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
Frontier Capital Appreciation |
||||||||||||||||||
2004 |
521 |
$13.09 to $13.47 |
6,826 |
- |
0.00% to 0.75% |
8.54% to 9.33% |
||||||||||||
2003 |
491 |
$12.06 to $12.32 |
5,926 |
- |
0.00% to 0.75% |
54.62% to 55.95% |
||||||||||||
2002 |
435 |
$7.80 to $7.90 |
3,390 |
- |
0.00% to 0.75% |
-25.79% to -25.26% |
||||||||||||
2001 |
164 |
$10.51 to $10.57 |
1,727 |
(b) |
0.00% to 0.75% |
(b) |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
||||||||||||
Turner Core Growth |
||||||||||||||||||
2004 |
259 |
$10.21 to $10.50 |
2,652 |
0.29 |
0.00% to 0.75% |
10.38% to 11.23% |
||||||||||||
2003 |
166 |
$9.25 to $9.44 |
1,538 |
0.28 |
0.00% to 0.75% |
33.67% to 34.47% |
||||||||||||
2002 |
89 |
$6.92 to $7.02 |
619 |
0.28 |
0.00% to 0.75% |
-27.08% to -26.49% |
||||||||||||
2001 |
31 |
$9.49 to $9.55 |
296 |
(b) |
0.00% to 0.75% |
(b) |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
||||||||||||
Neuberger Berman AMT Growth |
||||||||||||||||||
2004 |
762 |
$8.96 to $18.81 |
13,491 |
- |
0.00% to 0.75% |
15.68% to 16.67% |
||||||||||||
2003 |
906 |
$7.68 to $16.26 |
14,408 |
- |
0.00% to 0.75% |
30.39% to 31.28% |
||||||||||||
2002 |
788 |
$5.85 to $12.47 |
9,722 |
- |
0.00% to 0.75% |
-31.93% to -31.18% |
||||||||||||
2001 |
716 |
$8.50 to $18.32 |
13,020 |
50.01 |
0.00% to 0.75% |
-30.66% |
||||||||||||
2000 |
755 |
$26.42 |
19,945 |
(a) |
(a) |
(a) |
||||||||||||
Neuberger Berman AMT Limited Maturity Bond |
||||||||||||||||||
2004 |
1,916 |
$11.51 to $15.32 |
27,815 |
3.39 |
0.00% to 0.75% |
0.00% to 0.79% |
||||||||||||
2003 |
2,092 |
$11.42 to $15.32 |
30,686 |
4.65 |
0.00% to 0.75% |
1.66% to 2.42% |
||||||||||||
2002 |
2,229 |
$11.15 to $15.07 |
32,704 |
4.04 |
0.00% to 0.75% |
4.44% to 5.39% |
||||||||||||
2001 |
1,603 |
$10.58 to $14.43 |
22,975 |
5.37 |
0.00% to 0.75% |
8.01% |
||||||||||||
2000 |
1,085 |
$13.36 |
14,494 |
(a) |
(a) |
(a) |
S-80 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Investment |
||||||||||||||||||
Units |
Unit Fair Value |
Net Assets |
Income |
Expense Ratio B |
Total Return C |
|||||||||||||
Division |
(000's) |
(lowest to highest) |
(000's) |
Ratio A |
(lowest to highest) |
(lowest to highest) |
||||||||||||
Pioneer Mid-Cap Value VCT |
||||||||||||||||||
2004 |
1,157 |
$13.97 to $14.26 |
$ 16,219 |
0.34 |
% |
0.00% to 0.75% |
21.27% to 22.19% |
|||||||||||
2003 |
616 |
$11.52 to $11.67 |
7,115 |
0.15 |
0.00% to 0.75% |
36.33% to 37.46% |
||||||||||||
2002 |
102 |
$8.45 to $8.49 |
864 |
(c) |
0.00% to 0.75% |
(c) |
||||||||||||
2001 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
2000 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
Pioneer Small Cap Value VCT |
||||||||||||||||||
2004 |
428 |
$12.70 to $12.96 |
5,468 |
- |
0.00% to 0.75% |
19.25% to 20.11% |
||||||||||||
2003 |
229 |
$10.65 to $10.79 |
2,455 |
- |
0.00% to 0.75% |
34.47% to 35.55% |
||||||||||||
2002 |
96 |
$7.92 to $7.96 |
760 |
(c) |
0.00% to 0.75% |
(c) |
||||||||||||
2001 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
2000 |
(c) |
(c) |
(c) |
(c) |
(c) |
(c) |
||||||||||||
Putnam VT Growth and Income |
||||||||||||||||||
2004 |
643 |
$11.02 to $11.34 |
7,148 |
1.33 |
0.00% to 0.75% |
10.20% to 11.07% |
||||||||||||
2003 |
527 |
$10.00 to $10.21 |
5,300 |
1.85 |
0.00% to 0.75% |
26.58% to 27.47% |
||||||||||||
2002 |
658 |
$7.90 to $8.01 |
5,213 |
1.82 |
0.00% to 0.75% |
-19.63% to -19.01% |
||||||||||||
2001 |
344 |
$9.83 to $9.89 |
3,383 |
(b) |
0.00% to 0.75% |
(b) |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
||||||||||||
Putnam VT New Opportunities |
||||||||||||||||||
2004 |
336 |
$9.48 to $9.76 |
3,195 |
- |
0.00% to 0.75% |
9.47% to 10.41% |
||||||||||||
2003 |
89 |
$8.66 to $8.84 |
776 |
- |
0.00% to 0.75% |
31.41% to 32.34% |
||||||||||||
2002 |
88 |
$6.59 to $6.68 |
579 |
- |
0.00% to 0.75% |
-31.07% to -30.49% |
||||||||||||
2001 |
42 |
$9.56 to $9.61 |
397 |
(b) |
0.00% to 0.75% |
(b) |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
||||||||||||
Putnam VT Small Cap Value |
||||||||||||||||||
2004 |
1,186 |
$17.50 to $18.00 |
20,927 |
0.33 |
0.00% to 0.75% |
25.27% to 26.23% |
||||||||||||
2003 |
1,135 |
$13.97 to $14.26 |
15,925 |
0.30 |
0.00% to 0.75% |
76.39% to 79.15% |
||||||||||||
2002 |
1,032 |
$7.92 to $7.96 |
9,712 |
1.05 |
0.00% to 0.75% |
-18.76% to -18.27% |
||||||||||||
2001 |
535 |
$11.57 to $11.66 |
6,191 |
(b) |
0.00% to 0.75% |
(b) |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
S-81 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Investment |
||||||||||||||||||
Units |
Unit Fair Value |
Net Assets |
Income |
Expense Ratio B |
Total Return C |
|||||||||||||
Division |
(000's) |
(lowest to highest) |
(000's) |
Ratio A |
(lowest to highest) |
(lowest to highest) |
||||||||||||
Putnam VT Voyager |
||||||||||||||||||
2004 |
174 |
$8.97 to $9.22 |
$ 1,574 |
0.20 |
% |
0.00% to 0.75% |
4.30% to 5.01% |
|||||||||||
2003 |
168 |
$8.60 to $8.78 |
1,455 |
0.37 |
0.00% to 0.75% |
23.92% to 24.89% |
||||||||||||
2002 |
183 |
$6.94 to $7.03 |
1,275 |
0.50 |
0.00% to 0.75% |
-27.02% to -26.54% |
||||||||||||
2001 |
90 |
$9.51 to $9.57 |
852 |
(b) |
0.00% to 0.75% |
(b) |
||||||||||||
2000 |
(b) |
(b) |
(b) |
(b) |
(b) |
(b) |
||||||||||||
Van Eck Worldwide Bond |
||||||||||||||||||
2004 |
355 |
$14.75 to $14.93 |
5,248 |
8.72 |
0.00% to 0.75% |
8.38% to 9.14% |
||||||||||||
2003 |
394 |
$13.61 to $13.68 |
5,371 |
0.02 |
0.00% to 0.75% |
17.23% to 18.13% |
||||||||||||
2002 |
329 |
$11.58 to $11.61 |
3,820 |
- |
0.00% to 0.75% |
20.81% to 21.64% |
||||||||||||
2001 |
127 |
$9.52 to $9.61 |
1,225 |
3.92 |
0.00% to 0.75% |
-5.78% to -4.99% |
||||||||||||
2000 |
91 |
$10.02 to $10.20 |
931 |
(a) |
(a) |
(a) |
||||||||||||
Van Eck Worldwide Emerging Markets |
||||||||||||||||||
2004 |
994 |
$14.10 to $15.30 |
14,257 |
0.51 |
0.00% to 0.75% |
24.89% to 25.93% |
||||||||||||
2003 |
967 |
$11.29 to $12.15 |
10,998 |
0.08 |
0.00% to 0.75% |
53.19% to 54.19% |
||||||||||||
2002 |
777 |
$7.37 to $7.88 |
5,740 |
0.17 |
0.00% to 0.75% |
-3.67% to -2.96% |
||||||||||||
2001 |
588 |
$7.65 to $8.12 |
4,516 |
- |
0.00% to 0.75% |
-2.55% to -1.81% |
||||||||||||
2000 |
579 |
$7.85 to $8.27 |
4,562 |
(a) |
(a) |
(a) |
||||||||||||
Van Eck Worldwide Hard Assets |
||||||||||||||||||
2004 |
514 |
$15.58 to $16.34 |
8,359 |
0.39 |
0.00% to 0.75% |
23.04% to 23.95% |
||||||||||||
2003 |
545 |
$12.57 to $13.28 |
7,224 |
0.34 |
0.00% to 0.75% |
44.03% to 45.15% |
||||||||||||
2002 |
233 |
$8.66 to $9.22 |
2,148 |
0.62 |
0.00% to 0.75% |
-3.66% to -2.81% |
||||||||||||
2001 |
181 |
$8.91 to $9.57 |
1,727 |
1.15 |
0.00% to 0.75% |
-11.06% |
||||||||||||
2000 |
215 |
$10.76 |
2,313 |
(a) |
(a) |
(a) |
S-82 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
SEPARATE ACCOUNT L1 |
Notes to Financial Statements |
Investment |
||||||||||||||||||
Units |
Unit Fair Value |
Net Assets |
Income |
Expense Ratio B |
Total Return C |
|||||||||||||
Division |
(000's) |
(lowest to highest) |
(000's) |
Ratio A |
(lowest to highest) |
(lowest to highest) |
||||||||||||
Van Eck Worldwide Real Estate |
||||||||||||||||||
2004 |
614 |
$17.83 to $20.22 |
$ 11,291 |
1.26 |
% |
0.00% to 0.75% |
35.18% to 36.25% |
|||||||||||
2003 |
493 |
$13.19 to $14.84 |
6,614 |
1.90 |
0.00% to 0.75% |
33.50% to 34.42% |
||||||||||||
2002 |
490 |
$9.88 to $11.04 |
4,886 |
2.47 |
0.00% to 0.75% |
-5.18% to -4.42% |
||||||||||||
2001 |
271 |
$10.42 to $11.55 |
2,826 |
1.98 |
0.00% to 0.75% |
4.51% to 5.29% |
||||||||||||
2000 |
131 |
$9.97 to $10.97 |
1,312 |
(a) |
(a) |
(a) |
||||||||||||
(a) |
Not provided for 2000. |
|||||||||||||||||
(b) |
As investment Division was not available until 2001, this data is not meaningful and is therefore not presented. |
|||||||||||||||||
(c) |
As investment Division was not available until 2002, this data is not meaningful and is therefore not presented. |
|||||||||||||||||
(d) |
As investment Division was not available until 2003, this data is not meaningful and is therefore not presented. |
|||||||||||||||||
(e) |
As investment Division was not available until 2004, this data is not meaningful and is therefore not presented. |
|||||||||||||||||
A |
The Investment Income Ratio represents dividends received by the Division, excluding capital gains distributions, divided by the average net assets. |
|||||||||||||||||
The recognition of investment income is determined by the timing of the declaration of dividends by the underlying fund in which the Division invests. |
||||||||||||||||||
B |
The Expense Ratio considers only the expenses borne directly by the Account and is equal to the mortality and expense charge, as defined in Note 3. Certain |
|||||||||||||||||
items in this table are presented as a range of minimum and maximum values; however, such information is calculated independently for each column in the table. |
||||||||||||||||||
C |
Total Return is calculated as the change in unit value for each Contract presented in the Statements of Assets and Liabilities. Certain items in this |
|||||||||||||||||
table are presented as a range of minimum and maximum values; however, such information is calculated independently for each column in the table. |
S-83 |
FINANCIAL STATEMENTS - STATUTORY BASIS |
Security Life of Denver Insurance Company |
Years ended December 31, 2004 and 2003 |
with Report of Independent Registered Public Accounting Firm |
F-1 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
Financial Statements - Statutory Basis |
Years ended December 31, 2004 and 2003 |
Contents |
|
Report of Independent Registered Public Accounting Firm |
F-3 |
Audited Financial Statements - Statutory Basis |
|
Balance Sheets - Statutory Basis |
F-5 |
Statements of Operations - Statutory Basis |
F-7 |
Statements of Changes in Capital and Surplus - Statutory Basis |
F-8 |
Statements of Cash Flows - Statutory Basis |
F-9 |
Notes to Financial Statements - Statutory Basis |
F-10 |
F-2 |
Report of Independent Registered Public Accounting Firm |
Board of Directors and Stockholder |
Security Life of Denver Insurance Company |
We have audited the accompanying statutory-basis balance sheets of Security Life of Denver Insurance Company (the "Company," and a wholly-owned direct subsidiary of ING America Insurance Holdings, Inc.), as of December 31, 2004 and 2003, and the related statutory-basis statements of operations, changes in capital and surplus, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. |
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. W e believe that our audits provide a reasonable basis for our opinion. |
As described in Note 1 to the financial statements, the Company presents its financial statements in conformity with accounting practices prescribed or permitted by the Division of Insurance of the Department of Regulatory Agencies of the State of Colorado ("Colorado Division of Insurance"), which practices differ from U.S. generally accepted accounting principles. The variances between such practices and U.S. generally accepted accounting principles and the effect on the accompanying financial statements are described in Note 1. The effects on the financial statements of these variances are not reasonably determinable but are presumed to be material. |
In our opinion, because of the effects of the matter described in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with U.S. generally accepted accounting principles, the financial position of Security Life of Denver Insurance Company at December 31, 2004 and 2003, or the results of its operations or its cash flows for the years then ended. |
F-3 |
However, in our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Security Life of Denver Insurance Company at December 31, 2004 and 2003, and the results of its operations and its cash flows for the years then ended, in conformity with accounting practices prescribed or permitted by the Colorado Division of Insurance. |
Atlanta, Georgia |
April 5, 2005 |
F-4 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
Balance Sheets - Statutory Basis |
December 31 |
||||||||
2004 |
2003 |
|||||||
(In Thousands) |
||||||||
Admitted assets |
||||||||
Cash and invested assets: |
||||||||
Bonds |
$ 13,129,384 |
$ 14,355,051 |
||||||
Preferred stocks |
20,325 |
12,520 |
||||||
Common stocks |
75,063 |
78,197 |
||||||
Subsidiaries |
83,962 |
76,187 |
||||||
Mortgage loans |
3,283,563 |
3,360,613 |
||||||
Real estate, less accumulated depreciation (2004 - $13,992; 2003 - $13,109) |
32,276 |
31,971 |
||||||
Contract loans |
1,155,638 |
1,157,009 |
||||||
Other invested assets |
108,293 |
185,527 |
||||||
Cash and short-term investments |
842,029 |
436,834 |
||||||
Total cash and invested assets |
18,730,533 |
19,693,909 |
||||||
Deferred and uncollected premiums, less loading (2004 - $2,265; 2003 - $2,612) |
20,824 |
7,558 |
||||||
Accrued investment income |
220,667 |
258,958 |
||||||
Reinsurance balances recoverable |
41,464 |
150,699 |
||||||
Data processing equipment, less accumulated |
||||||||
depreciation(2004-$3,550;2003-$3,838) |
- |
31 |
||||||
Indebtedness from related parties |
19 |
14 |
||||||
Federal income tax recoverable (including $69,896 and $80,920 |
||||||||
net deferred tax assets at December 31, 2004 and 2003, respectively) |
134,989 |
80,920 |
||||||
Separate account assets |
1,974,914 |
1,830,315 |
||||||
Other assets |
26,612 |
13,886 |
||||||
Total admitted assets |
$ 21,150,022 |
$ 22,036,290 |
The accompanying notes are an integral part of these financial statements. |
F-5 |
SECURITY LIFE OF DENVER INSURANCE COMPANY |
Balance Sheets - Statutory Basis |
December 31 |
||||||||
2004 |
2003 |
|||||||
(In Thousands, |
||||||||
except share amounts) |
||||||||
Liabilities and capital and surplus |
||||||||
Liabilities: |
||||||||
Policy and contract liabilities: |
||||||||
Life and annuity reserves |
$ 10,202,000 |
$ 10,329,461 |
||||||
Accident and health reserves |
1,250 |
8 |
||||||
Deposit type contracts |
6,336,731 |
7,351,074 |
||||||
Policyholders' funds |
6,243 |
6,523 |
||||||
Dividends payable |
2,215 |
3,993 |
||||||
Unpaid claims |
20,128 |
219,525 |
||||||
Total policy and contract liabilities |
16,568,567 |
17,910,584 |
||||||
Interest maintenance reserve |
44,548 |
43,943 |
||||||
Accounts payable and accrued expenses |
148,441 |
138,470 |
||||||
Reinsurance balances due |
594,695 |
412,454 |
||||||
Federal income tax payable |
- |
2,426 |
||||||
Indebtedness to related parties |
11,058 |
50,688 |
||||||
Contingency reserve |
47,131 |
25,047 |
||||||
Asset valuation reserve |
140,272 |
112,792 |
||||||
Borrowed money |
553,620 |
378,274 |
||||||
Other liabilities |
9,899 |
113,886 |
||||||
Separate account liabilities |
1,962,045 |
1,811,812 |
||||||
Total liabilities |
20,080,276 |
21,000,376 |
||||||
Capital and surplus: |
||||||||
Common stock: $20,000 par value; authorized 149 shares; |
||||||||
issued and outstanding 144 shares |
2,880 |
2,880 |
||||||
Surplus notes |
165,032 |
165,032 |
||||||
Paid-in and contributed surplus |
934,778 |
934,778 |
||||||
Unassigned deficit |
(32,944) |
(66,776) |
||||||
Total capital and surplus |
1,069,746 |
1,035,914 |
||||||
Total liabilities and capital and surplus |
$ 21,150,022 |
$ 22,036,290 |
The accompanying notes are an integral part of these financial statements. |
F-6 |
Security Life of Denver Insurance Company |
Statements of Operations - Statutory Basis |
Year ended December 31 |
||||||||
2004 |
2003 |
|||||||
(In Thousands) |
||||||||
Premiums and other revenues: |
||||||||
Life, annuity, and accident and health premiums |
$ 1,259,922 |
$ 1,518,182 |
||||||
Policy proceeds and dividends left on deposit |
84 |
51 |
||||||
Net investment income |
842,988 |
879,482 |
||||||
Amortization of interest maintenance reserve |
(12,135) |
(10,375) |
||||||
Commissions, expense allowances and reserve adjustments |
||||||||
on reinsurance ceded |
163,916 |
274,876 |
||||||
Other income |
122,606 |
97,955 |
||||||
Total premiums and other revenues |
2,377,381 |
2,760,171 |
||||||
Benefits paid or provided: |
||||||||
Death benefits |
340,989 |
556,608 |
||||||
Annuity benefits |
14,153 |
14,673 |
||||||
Surrender benefits |
1,017,837 |
1,384,450 |
||||||
Interest on policy or contract funds |
289,995 |
234,620 |
||||||
Accident and health benefits |
553 |
(63) |
||||||
Other benefits |
8,081 |
542 |
||||||
Change in life, annuity, and accident and health reserves |
(20,627) |
(134,488) |
||||||
Net transfers to separate accounts |
92,380 |
59,513 |
||||||
Total benefits paid or provided |
1,743,361 |
2,115,855 |
||||||
Insurance expenses: |
||||||||
Commissions |
480,700 |
405,142 |
||||||
General expenses |
176,702 |
158,161 |
||||||
Insurance taxes, licenses and fees, excluding federal income taxes |
27,687 |
31,896 |
||||||
Miscellaneous deductions |
43,206 |
2,260 |
||||||
Total insurance expenses |
728,295 |
597,459 |
||||||
(Loss) gain from operations before policyholder dividends, |
||||||||
federal income taxes and net realized capital losses |
(94,275) |
46,857 |
||||||
Dividends to policyholders |
1,253 |
2,777 |
||||||
(Loss) gain from operations before federal income taxes and |
||||||||
net realized capital losses |
(95,528) |
44,080 |
||||||
Federal income tax (benefit) expense |
(143,489) |
128,340 |
||||||
Gain (loss) from operations before net realized capital losses |
47,961 |
(84,260) |
||||||
Net realized capital losses, net of income taxes |
(6,682) |
(51,852) |
||||||
Net income (loss) |
$ 41,279 |
$ (136,112) |
The accompanying notes are an integral part of these financial statements. |
F-7 |
Security Life of Denver Insurance Company |
Statements of Changes in Capital and Surplus-Statutory Basis |
Year ended December 31 |
||||||||
2004 |
2003 |
|||||||
(In Thousands) |
||||||||
Common stock: |
||||||||
Balance at beginning and end of year |
$ 2,880 |
$ 2,880 |
||||||
Surplus notes: |
||||||||
Balance at beginning and end of year |
165,032 |
165,032 |
||||||
Paid-in and contributed surplus: |
||||||||
Balance at beginning of year |
934,778 |
914,778 |
||||||
Capital contributions |
- |
20,000 |
||||||
Balance at end of year |
934,778 |
934,778 |
||||||
Unassigned deficit: |
||||||||
Balance at beginning of year |
(66,776) |
73,431 |
||||||
Net income (loss) |
41,279 |
(136,112) |
||||||
Change in net unrealized capital gains or losses |
14,448 |
14,535 |
||||||
Change in nonadmitted assets |
153,378 |
(63,953) |
||||||
Change in liability for reinsurance in unauthorized companies |
2,701 |
298 |
||||||
Change in asset valuation reserve |
(27,480) |
(26,911) |
||||||
Change in net deferred income tax |
(128,882) |
73,531 |
||||||
Dividends to stockholder |
- |
(136,055) |
||||||
Deferred gain on reinsurance transaction |
- |
134,460 |
||||||
Amortization of deferred gain on reinsurance transaction |
(20,174) |
- |
||||||
Change in additional minimum pension liability |
(1,438) |
- |
||||||
Balance at end of year |
(32,944) |
(66,776) |
||||||
Total capital and surplus |
$ 1,069,746 |
$ 1,035,914 |
The accompanying notes are an integral part of these financial statements. |
F-8 |
Security Life of Denver Insurance Company |
Statements of Cash Flows-Statutory Basis |
Year ended December 31 |
||||||||
2004 |
2003 |
|||||||
(In Thousands) |
||||||||
Operations |
||||||||
Premiums, policy proceeds, and other |
||||||||
considerations received, net of reinsurance paid |
$ 1,684,579 |
$ 1,666,208 |
||||||
Net investment income received |
1,043,665 |
1,090,158 |
||||||
Commission, expenses and other miscellaneous expenses paid |
(707,222) |
(564,437) |
||||||
Benefits paid |
(2,986,209) |
(1,567,613) |
||||||
Net transfers (to) from separate accounts |
(174,122) |
19,093 |
||||||
Dividends paid to policyholders |
(3,031) |
(2,667) |
||||||
Federal income taxes received (paid) |
48,363 |
(116,165) |
||||||
Other revenues received |
391,696 |
451,807 |
||||||
Net cash (used in) provided by operations |
(702,281) |
976,384 |
||||||
Investment activities |
||||||||
Proceeds from sales, maturities, or repayments of investments: |
||||||||
Bonds |
11,949,069 |
12,745,682 |
||||||
Stocks |
21,367 |
10,286 |
||||||
Mortgage loans |
621,265 |
587,575 |
||||||
Real estate |
5,859 |
1,375 |
||||||
Other invested assets |
15,052 |
12,737 |
||||||
Net (loss) gain on cash and short term investments |
(28,892) |
9,607 |
||||||
Miscellaneous proceeds |
64,236 |
61,278 |
||||||
Net proceeds from sales, maturities, or repayments of investments |
12,647,956 |
13,428,540 |
||||||
Cost of investments acquired: |
||||||||
Bonds |
10,825,302 |
13,767,690 |
||||||
Stocks |
26,821 |
3,954 |
||||||
Mortgage loans |
544,499 |
667,541 |
||||||
Real estate |
4,550 |
- |
||||||
Other invested assets |
16,079 |
15,702 |
||||||
Miscellaneous applications |
55,191 |
41,338 |
||||||
Total cost of investments acquired |
11,472,442 |
14,496,225 |
||||||
Net change in contract loans |
1,371 |
(19,498) |
||||||
Net cash provided by (used in) investment activities |
1,176,885 |
(1,087,183) |
||||||
Financing and miscellaneous activities |
||||||||
Cash (used in) provided by: |
||||||||
Capital and surplus paid-in |
- |
30,620 |
||||||
Borrowed money received |
175,339 |
17,789 |
||||||
Net deposits on deposit-type contract funds |
42,734 |
50,604 |
||||||
Dividends to stockholders |
- |
(224,755) |
||||||
Other (uses) sources |
(287,482) |
228,863 |
||||||
Net cash (used in) provided by financing and miscellaneous activities |
(69,409) |
103,121 |
||||||
Net change in cash and short-term investments |
405,195 |
(7,678) |
||||||
Cash and short-term investments |
||||||||
Beginning of year |
436,834 |
444,512 |
||||||
End of year |
$ 842,029 |
$ 436,834 |
The accompanying notes are an integral part of these financial statements. |
F-9 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
1. |
Nature of Operations and Significant Accounting Policies |
Security Life of Denver Insurance Company (the "Company") is domiciled in Colorado and is a wholly-owned subsidiary of ING America Insurance Holdings, Inc. ("ING AIH"). ING AIH's ultimate parent is ING Groep, N.V. ("ING"), a global financial services company based in The Netherlands. The Company focuses on three markets: the advanced market, reinsurance to other insurers, and the investment products market. The life insurance products offered for the advanced market include wealth transfer and estate planning, executive benefits, charitable giving and corporate-owned life insurance. These products include traditional life, interest-sensitive life, universal life, and variable life. Operations are conducted almost entirely on the general agency basis and the Company is presently licensed in all states (approved for reinsurance only in New York), the District of Columbia, Puerto Rico and the U.S. Virgin Islands. In the reinsurance market, the Company offer s financial security to clients through a mix of total risk management and traditional life insurance services. In the investment products market, the Company offers guaranteed investment contracts, funding agreements, and trust notes to institutional buyers. |
|
An affiliate, Southland Life Insurance Company ("Southland"), merged with and into the Company on October 1, 2004. The transaction was approved by the Division of Insurance of the Department of Regulatory Agencies of the State of Colorado ("Colorado Division of Insurance") and was accounted for as a statutory merger. No consideration was paid and no common stock was issued in exchange for all of the common shares of Southland. The accompanying financial statements have been restated as though the merger took place prior to all periods presented. Pre-merger separate company revenue, net income (loss) and other surplus adjustments for the nine months ended September 30, 2004 were $1,803,240,000, $130,837,000 and $1,002,921,000, respectively, for the Company and $305,811,000, $45,812,000 and $181,174,000, respectively, for Southland. |
|
On October 17, 2004, the Company and its Bermuda-based affiliate, Security Life of Denver International ("SLDI"), signed an Asset Purchase Agreement with Scottish Re Group Limited and Scottish RE (U.S.), Inc. (collectively, "Scottish Re"); additionally, Scottish Re Life (Bermuda) Limited ("Scottish Bermuda"), a wholly-owned subsidiary of Scottish Re formed under the law of Bermuda, also signed the Asset Purchase Agreement upon its formation. Pursuant to the Asset Purchase Agreement and reinsurance agreements entered into in connection therewith, the Company and SLDI reinsured their individual life reinsurance business (and sold certain systems and operating assets used in the individual life reinsurance business) to Scottish Re and Scottish Bermuda on a 100% coinsurance basis. The transaction closed on December 31, 2004, and the Company paid a ceding commission of approximately $560 million and transferred assets backing reserves and miscellaneous other liab ilities on the individual life reinsurance to Scottish Re and Scottish Bermuda. The ceding commission (net of taxes), along with other reserve assets, will be held in trust for the benefit of the Company and SLDI to secure Scottish Re's and Scottish Bermuda's obligations as reinsurer on the acquired business. |
F-10 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
ING AIH remains obligated to maintain collateral for certain reserve requirements of the business transferred from SLDI for the duration of such reserve requirements or until underlying reinsurance contracts are novated to Scottish Re or until Scottish Re puts into place its own collateral for such reserve requirements. The ceding commission will be released from trust based upon a predetermined schedule or upon the earlier release of ING AIH collateral obligations. |
|
As of, and for the twelve months ended December 31, 2004, the financial impacts to the Company are a reduction in invested assets of $472 million, a reduction in capital and surplus of $116 million, and a reduction in net income of approximately $116 million. |
|
Basis of Presentation |
|
The preparation of financial statements of insurance companies requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. |
|
The accompanying financial statements of the Company have been prepared in conformity with accounting practices prescribed or permitted by the Colorado Division of Insurance, which practices differ from accounting principles generally accepted in the United States ("GAAP"). The most significant variances from GAAP are as follows: |
|
Investments: Investments in bonds and mandatorily redeemable preferred stocks are reported at amortized cost or market value based on the National Association of Insurance Commissioners ("NAIC") rating; for GAAP, such fixed maturity investments are designated at purchase as held-to-maturity, trading or available-for-sale. Held-to-maturity investments are reported at amortized cost, and the remaining fixed maturity investments are reported at fair value with unrealized capital gains and losses reported in operations for those designated as trading and as a separate component of other comprehensive income in stockholder's equity for those designated as available-for-sale. |
|
For structured securities, when a negative yield results from a revaluation based on new prepayment assumptions (i.e., undiscounted cash flows are less than current book value), an other than temporary impairment is considered to have occurred and the asset is written down to the value of the undiscounted cash flows. For GAAP, assets are re-evaluated based on the discounted cash flows using a current market rate. Impairments are recognized when there has been an adverse change in cash flows and the fair value is less than book value. The asset is then written down to fair value. |
|
Investments in real estate are reported net of related obligations rather than on a gross basis. Real estate owned and occupied by the Company is included in investments rather than reported as an operating asset as under GAAP, and investment income and operating |
F-11 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
expenses include rent for the Company's occupancy of those properties. Changes between depreciated cost and admitted asset investment amounts are credited or charged directly to unassigned surplus (deficit) rather than income as would be required under GAAP. |
|
Statement of Statutory Accounting Principles ("SSAP") No. 31, Derivative Instruments applies to derivative transactions prior to January 1, 2003. The Company also follows the hedge accounting guidance in SSAP No. 86, Accounting for Derivative Instruments for derivative transactions entered into or modified on or after January 1, 2003. Under this guidance, derivatives that are deemed effective hedges are accounted for in a manner which is consistent with the underlying hedged item. Derivatives used in hedging transactions that do not meet the requirements of SSAP No. 86 as an effective hedge are carried at fair value with the change in value recorded in surplus as unrealized gains or losses. Embedded derivatives are not accounted for separately from the host contract. Under GAAP, the effective and ineffective portions of a single hedge are accounted for separately, an embedded derivative within a contract that is not clearly and closely related to the econo mic characteristics and risk of the host contract is accounted for separately from the host contract and valued and reported at fair value, and the change in fair value for cash flow hedges is credited or charged directly to a separate component of shareholder's equity rather than to income as required for fair value hedges. |
|
Redeemable preferred stocks rated as high quality or better are reported at cost or amortized cost. All other redeemable preferred stocks are reported at the lower of cost, amortized cost, or market value, and nonredeemable preferred stocks are reported at market value or the lower of cost or market value as determined by the Securities Valuation Office of the NAIC ("SVO"). |
|
Common stocks are reported at market value as determined by the SVO and the related unrealized capital gains/losses are reported in unassigned surplus (deficit) along with adjustment for federal income taxes. |
|
Valuation Reserves: The asset valuation reserve ("AVR") is determined by an NAIC-prescribed formula and is reported as a liability rather than as a valuation allowance or an appropriation of surplus. The change in AVR is reported directly to unassigned deficit. |
|
Under a formula prescribed by the NAIC, the Company defers the portion of realized gains and losses on sales of fixed-income investments, principally bonds and mortgage loans, attributable to changes in the general level of interest rates, and amortizes those deferrals over the remaining period to maturity based on groupings of individual securities sold in five-year bands. The net deferral or interest maintenance reserve ("IMR") is reported as a component of other liabilities in the accompanying balance sheets. |
F-12 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Realized gains and losses on investments are reported in operations net of federal income tax and transfers to the IMR. Under GAAP, realized capital gains and losses are reported in the statements of operations on a pretax basis in the period that the asset giving rise to the gain or loss is sold and valuation allowances are provided when there has been a decline in value deemed other than temporary, in which case the provision for such declines is charged to income. |
|
Valuation allowances, if necessary, are established for mortgage loans based on the difference between the net value of the collateral, determined as the fair value of the collateral less estimated costs to obtain and sell, and the recorded investment in the mortgage loan. Under GAAP, such allowances are based on the present value of expected future cash flows discounted at the loan's effective interest rate or, if foreclosure is probable, on the estimated fair value of the collateral. |
|
The initial valuation allowance and subsequent changes in the allowance for mortgage loans as a result of a temporary impairment are charged or credited directly to unassigned surplus (deficit), rather than being included as a component of earnings as would be required under GAAP. |
|
Policy Acquisition Costs: The costs of acquiring and renewing business are expensed when incurred. Under GAAP, acquisition costs related to traditional life insurance, to the extent recoverable from future policy revenues, are deferred and amortized over the premium-paying period of the related policies using assumptions consistent with those used in computing policy benefit reserves. For universal life insurance and investment products, to the extent recoverable from future gross profits, acquisition costs are amortized generally in proportion to the present value of expected gross margins from surrender charges and investment, mortality, and expense margins. |
|
Premiums: Life premiums are recognized as revenue when due. Premiums for annuity policies with mortality and morbidity risk, except for guaranteed interest and group annuity contracts, are also recognized as revenue when due. Premiums received for annuity policies without mortality or morbidity risk and for guaranteed interest and group annuity contracts are recorded using deposit accounting. In deposit accounting, premiums are credited to an appropriate policy reserve account, without recognizing premium through income. |
|
Under GAAP, premiums for traditional life insurance products, which include those products with fixed and guaranteed premiums and benefits and consist primarily of whole life insurance policies, are recognized as revenue when due. Group insurance premiums are recognized as premium revenue over the time period to which the premiums relate. Revenues for universal life, annuities and guaranteed interest contracts consist of policy charges for the cost of insurance, policy administration charges, amortization of policy initiation fees and surrender charges assessed during the period. |
F-13 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Benefit and Contract Reserves: Life policy and contract reserves under statutory accounting practices are calculated based upon both the net level premium and Commissioners' Reserve Valuation methods using statutory rates for mortality and interest. GAAP requires that policy reserves for traditional products be based upon the net level premium method utilizing reasonably conservative estimates of mortality, interest, and withdrawals prevailing when the policies were sold. For interest-sensitive products, the GAAP policy reserve is equal to the policy fund balance plus an unearned revenue reserve which reflects the unamortized balance of early year policy loads over renewal year policy loads. |
|
Reinsurance: For business ceded to unauthorized reinsurers, statutory accounting practices require that reinsurance credits permitted by the treaty be recorded as an offsetting liability and charged against unassigned surplus (deficit). Under GAAP, an allowance for amounts deemed uncollectible would be established through a charge to earnings. Statutory income recognized on certain reinsurance treaties representing financing arrangements is not recognized on a GAAP basis. |
|
Policy and contract liabilities ceded to reinsurers have been reported as reductions of the related reserves rather than as assets as required under GAAP. |
|
Commissions allowed by reinsurers on business ceded are reported as income when received rather than being deferred and amortized with deferred policy acquisition costs as required under GAAP. |
|
Gains and losses generated in certain reinsurance transactions are deferred and amortized over the remaining life the business for GAAP purposes. For statutory, such amounts are recognized immediately in income, with gains reported as a separate component of surplus. |
|
Subsidiaries: The accounts and operations of the Company's subsidiaries are not consolidated with the accounts and operations of the Company as would be required under GAAP. |
|
Nonadmitted Assets: Certain assets designated as "nonadmitted," principally deferred federal income tax assets, disallowed interest maintenance reserves, non-operating software, past-due agents' balances, furniture and equipment, intangible assets, and other assets not specifically identified as an admitted asset within the NAIC Accounting Practices and Procedures Manual, are excluded from the accompanying balance sheets and are charged directly to unassigned surplus (deficit). |
|
Employee Benefits: For purposes of calculating the Company's pension and postretirement benefit obligation, only vested participants and current retirees are included in the valuation. Under GAAP, active participants not currently vested are also included. |
F-14 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Universal Life and Annuity Policies: Revenues for universal life and annuity policies consist of the entire premium received and benefits incurred represent the total of death benefits paid and the change in policy reserves. Under GAAP, premiums received in excess of policy charges would not be recognized as premium revenue and benefits would represent the excess of benefits paid over the policy account value and interest credited to the account values. |
||
Policyholder Dividends: Policyholder dividends are recognized when declared rather than over the term of the related policies. |
||
Deferred Income Taxes: Deferred tax assets are provided for and admitted to an amount determined under a standard formula. This formula considers the amount of differences that will reverse in the subsequent year, taxes paid in prior years that could be recovered through carrybacks, surplus limits, and the amount of deferred tax liabilities available for offset. Any deferred tax assets not covered under the formula are non-admitted. Deferred taxes do not include any amounts for state taxes. Under GAAP, a deferred tax asset is recorded for the amount of gross deferred tax assets that are expected to be realized in future years and a valuation allowance is established for the portion that is not realizable. |
||
Surplus Notes: Surplus notes are reported as a component of surplus. Under statutory accounting practices, no interest is recorded on the surplus notes until payment has been approved by the Colorado Division of Insurance. Under GAAP, surplus notes are reported as liabilities and the related interest is reported as a charge to earnings over the term of the notes. |
||
Statements of Cash Flows: Cash and short-term investments in the statements of cash flows represent cash balances and investments with initial maturities of one year or less. Under GAAP, the corresponding caption of cash and cash equivalents includes cash balances and investments with initial maturities of three months or less. |
||
Reconciliation to GAAP: The effects of the preceding variances from GAAP on the accompanying statutory-basis financial statements have not been determined, but are presumed to be material. |
||
Other significant accounting practices are as follows: |
||
Investments |
||
Investments are stated at values prescribed by the NAIC, as follows: |
||
Bonds not backed by other loans are principally stated at amortized cost using the interest method. |
F-15 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Single class and multi-class mortgage-backed/asset-backed securities are valued at amortized cost using the interest method including anticipated prepayments. Prepayment assumptions are obtained from dealer surveys or internal estimates and are based on the current interest rate and economic environment. The retrospective adjustment method is used to value all such securities except for higher-risk asset backed securities, which are valued using the prospective method. The Company has elected to use the book value as of January 1, 1994 as the cost for applying the retrospective method to securities purchased prior to that date where historical cash flows are not readily available. |
||
Redeemable preferred stocks rated as high quality or better are reported at cost or amortized cost. All other redeemable preferred stocks are reported at the lower of cost, amortized cost, or market value and nonredeemable preferred stocks are reported at market value or the lower of cost or market value as determined by the SVO. |
||
Common stocks are reported at market value as determined by the SVO and the related unrealized capital gains/losses are reported in unassigned surplus (deficit) along with adjustment for federal income taxes. |
||
The Company analyzes the general account investments to determine whether there has been an other than temporary decline in fair value below the amortized cost basis. Management considers the length of time and the extent to which the market value has been less than cost, the financial condition and near-term prospects of the issuer, future economic conditions and market forecasts, and the Company's intent and ability to retain the investment in the issuer for a period of time sufficient to allow for recovery in market value. If it is probable that all amounts due according to the contractual terms of a debt security will not be collected, an other than temporary impairment is considered to have occurred. |
||
The Company uses derivatives such as interest rate swaps, caps and floors as part of its overall interest rate risk management strategy for certain life insurance and annuity products. As the Company only uses derivatives for hedging purposes, the Company values all derivative instruments on a consistent basis with the hedged item. Upon termination, gains and losses on instruments are included in the carrying values of the underlying hedged items and are amortized over the remaining lives of the hedged items as adjustments to investment income or benefits from the hedged items. Any unamortized gains or losses are recognized when the underlying hedged items are sold. |
||
Interest rate swap contracts are used to convert the interest rate characteristics (fixed or variable) of certain investments to match those of the related insurance liabilities that the investments are supporting. The net interest effect of such swap transactions is reported as an adjustment of interest income from the hedged items as incurred. |
F-16 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Interest rate caps and floors are used to limit the effects of changing interest rates on yields of variable rate or short-term assets or liabilities. The initial cost of any such agreement is amortized to net investment income over the life of the agreement. Periodic payments that are receivable as a result of the agreements are accrued as an adjustment of interest income or benefits from the hedged items. |
||
The derivatives are reported in a manner that is consistent with the hedged asset or liability. All effective derivatives are reported at amortized cost. Upon termination of a derivative that qualified for hedge accounting, the gain or loss is deferred in IMR or adjusts the basis of the hedged item. |
||
The Company's insurance subsidiaries are reported at their underlying statutory-basis net assets plus the admitted portion of goodwill, and the Company's noninsurance subsidiary is reported at the GAAP basis of its net assets. Dividends from subsidiaries are included in net investment income. The remaining net change in the subsidiaries' equity is included in the change in net unrealized capital gains or losses. |
||
Mortgage loans are reported at amortized cost, less allowance for impairments. |
||
Contract loans are reported at unpaid principal balances. |
||
Land is reported at cost. Real estate occupied by the Company is reported at depreciated cost, and other real estate is reported at the lower of depreciated cost or fair value. Depreciation is calculated on a straight-line basis over the estimated useful lives of the properties. |
||
For reverse repurchase agreements, Company policies require a minimum of 95% of the fair value of securities purchased under reverse repurchase agreements to be maintained as collateral. Cash collateral received is invested in short-term investments and the offsetting collateral liability is included in miscellaneous liabilities. |
||
Reverse dollar repurchase agreements are accounted for as collateral borrowings, where the amount borrowed is equal to the sales price of the underlying securities. |
||
The Company engages in securities lending whereby certain domestic bonds from its portfolio are loaned to other institutions for short periods of time. Collateral, primarily cash, which is in excess of the market value of the loaned securities, is deposited by the borrower with a lending agent, and retained and invested by the lending agent to generate additional income for the Company. The Company does not have access to the collateral. The Company's policy requires a minimum of 102% of the fair value of securities loaned to be maintained as collateral. The market value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the market value fluctuates. |
F-17 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Short-term investments are reported at amortized cost. Short-term investments include investments with maturities of less than one year at the date of acquisition. |
||
Partnership interests, which are included in other invested assets, are reported at the underlying audited GAAP equity of the investee. |
||
Residual collateralized mortgage obligations, which are included in other invested assets, are reported at amortized cost using the effective interest method. |
||
Realized capital gains and losses are determined using the first-in first-out method. |
||
Cash on hand includes cash equivalents. Cash equivalents are short-term investments that are both readily convertible to cash and have an original maturity date of three months or less. Short-term investments are carried at amortized cost, which approximates market value. |
||
Aggregate Reserve for Life Policies and Contracts |
||
Life, annuity, and accident and health reserves are developed by actuarial methods and are determined based on published tables using statutorily specified interest rates and valuation methods that will provide, in the aggregate, reserves that are greater than or equal to the minimum or guaranteed policy cash value or the amounts required by law. Interest rates range from 2.0% to 11.3%. |
||
The Company waives the deduction of deferred fractional premiums upon the death of the insured. It is the Company's practice to return a pro rata portion of any premium paid beyond the policy month of death, although it is not contractually required to do so for certain issues. |
||
The methods used in valuation of substandard policies are as follows: |
||
For life, endowment and term policies issued substandard, the standard reserve during the premium-paying period is increased by 50% of the gross annual extra premium. Standard reserves are held on Paid-Up Limited Pay contracts. |
||
For reinsurance accepted with table rating, the reserve established is a multiple of the standard reserve corresponding to the table rating. |
||
For reinsurance with flat extra premiums, the standard reserve is increased by 50% of the flat extra. |
||
The tabular interest has been determined from the basic data for the calculation of policy reserves for all direct ordinary life insurance and for the portion of group life insurance classified as group Section 79. The method of determination of tabular interest of funds |
F-18 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
not involving life contingencies is as follows: current year reserves, plus payments, less prior year reserves, less funds added. |
|
Reinsurance |
|
Reinsurance premiums, commissions, expense reimbursements, and reserves related to reinsured business are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Reserves are based on the terms of the reinsurance contracts and are consistent with the risks assumed. Premiums and benefits ceded to other companies have been reported as a reduction of premium revenue and benefits expense. Amounts applicable to reinsurance ceded for reserves and unpaid claim liabilities have been reported as reductions of these items, and expense allowances received in connection with reinsurance ceded have been reflected in operations. |
|
Data Processing Equipment |
|
Electronic data processing equipment is carried at cost less accumulated depreciation. Depreciation for major classes of such assets is calculated on a straight-line basis over the estimated useful life of the asset. |
|
Participating Insurance |
|
Participating business approximates less than 1.0% of the Company's ordinary life insurance in force and 0.8% of premium income. The amount of dividends to be paid to participating policyholders is determined annually by the Board of Directors. Amounts allocable to participating policyholders are based on published dividend projections or expected dividend scales. Policyholder dividends of $1,253,000 and $2,777,000 were paid in 2004 and 2003, respectively. |
|
Pension Plans |
|
The Company provides noncontributory retirement plans for substantially all employees and certain agents. Pension costs are charged to operations as contributions are made to the plans. The Company also provides a contributory retirement plan for substantially all employees. |
F-19 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Nonadmitted Assets |
|
Nonadmitted assets are summarized as follows: |
December 31 |
|||
2004 |
2003 |
||
(In Thousands) |
|||
Contract loans |
$ 203 |
$ 203 |
|
Deferred federal income taxes |
171,861 |
290,383 |
|
Debit suspense |
- |
7,220 |
|
Agents' debit balances |
1,839 |
6,463 |
|
Furniture and equipment |
306 |
1,555 |
|
Deferred and uncollected premium |
672 |
872 |
|
Non-operating software asset in progress |
- |
11,582 |
|
Other |
2,351 |
12,332 |
|
Total nonadmitted assets |
$ 177,232 |
$ 330,610 |
Changes in nonadmitted assets are generally reported directly in unassigned surplus (deficit) as an increase or decrease in nonadmitted assets. Certain changes are reported directly in unassigned surplus (deficit) as a change in unrealized capital gains or losses. |
|
Claims and Claims Adjustment Expenses |
|
Claims expenses represent the estimated ultimate net cost of all reported and unreported claims incurred through December 31, 2004. The Company does not discount claims and claims adjustment expense reserves. Such estimates are based on actuarial projections applied to historical claim payment data. Such liabilities are considered to be reasonable and adequate to discharge the Company's obligations for claims incurred but unpaid as of December 31, 2004. |
|
Cash Flow Information |
|
Cash and short-term investments include cash on hand, demand deposits and short-term fixed maturity instruments with a maturity of less than one year at date of acquisition. |
|
Separate Accounts |
|
More than half of the separate account assets and liabilities held by the Company represent funds held for the benefit of the Company's variable life and annuity policy and contract holders who bear all of the investment risk associated with the policies. Such policies are of a non-guaranteed nature. All net investment experience, positive or negative, is attributed to the policy and contract holders' account values. The assets of these accounts are carried at fair value. |
F-20 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Certain other separate accounts relate to experience-rated group annuity contracts that fund defined contribution pension plans. These contracts provide guaranteed interest returns for one year only, where the guaranteed interest rate is re-established each year based on the investment experience of the separate account. In no event can the interest rate be less than zero. The assets and liabilities of these separate accounts are carried at book value. |
|
Reserves related to the Company's mortality risk associated with these policies are included in life and annuity reserves. The operations of the separate accounts are not included in the accompanying financial statements. These reserves include reserves for guaranteed minimum death benefits (before reinsurance) that totaled $20.8 million and $16.9 million at December 31, 2004 and 2003, respectively. |
|
Reclassifications |
|
Certain prior year amounts in the Company's statutory-basis financial statements have been reclassified to conform to the 2004 financial statement presentation. |
|
2. |
Permitted Statutory Basis Accounting Practices |
The financial statements of the Company are presented on the basis of accounting practices prescribed or permitted by the State of Colorado. The Colorado Division of Insurance recognizes only statutory accounting practices prescribed or permitted by the State of Colorado for determining and reporting the financial condition and results of operations of an insurance company and for determining its solvency under the Colorado Insurance Laws. The NAIC Accounting Practices and Procedures Manual has been adopted as a component of prescribed or permitted practices by the State of Colorado. The Commissioner of Insurance has the right to permit other specific practices that deviate from prescribed practices. |
|
The Company is required to identify those significant accounting practices that are permitted, and obtain written approval of the practices from the Colorado Division of Insurance. As of December 31, 2004 and 2003, the Company had no such permitted accounting practices. |
F-21 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
3. |
Investments |
The amortized cost and fair value of bonds and equity securities are as follows: |
Gross |
Gross |
|||||||||||
Amortized |
Unrealized |
Unrealized |
Fair |
|||||||||
Cost |
Gains |
Losses |
Value |
|||||||||
(In Thousands) |
||||||||||||
At December 31, 2004 : |
||||||||||||
U.S. Treasury securities and |
||||||||||||
obligations of U.S. government |
||||||||||||
corporations and agencies |
$ 94,988 |
$ 5,430 |
$ 211 |
$ 100,207 |
||||||||
States, municipalities, |
||||||||||||
and political subdivisions |
6,152 |
478 |
79 |
6,551 |
||||||||
Foreign government |
264,256 |
27,811 |
762 |
291,305 |
||||||||
Foreign other |
1,861,037 |
96,613 |
6,772 |
1,950,878 |
||||||||
Public utilities securities |
1,091,894 |
60,653 |
3,083 |
1,149,464 |
||||||||
Corporate securities |
4,694,821 |
226,827 |
10,995 |
4,910,653 |
||||||||
Residential mortgage-backed securities |
3,866,854 |
45,944 |
68,088 |
3,844,710 |
||||||||
Commercial mortgage-backed |
||||||||||||
securities |
410,176 |
16,123 |
1,648 |
424,651 |
||||||||
Other asset-backed securities |
840,155 |
12,881 |
30,717 |
822,319 |
||||||||
Total bonds |
13,130,333 |
492,760 |
122,355 |
13,500,738 |
||||||||
Preferred stocks |
20,325 |
348 |
2,392 |
18,281 |
||||||||
Common stocks |
73,293 |
1,782 |
12 |
75,063 |
||||||||
Total equity securities |
93,618 |
2,130 |
2,404 |
93,344 |
||||||||
Total |
$ 13,223,951 |
$ 494,890 |
$ 124,759 |
$ 13,594,082 |
F-22 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Gross |
Gross |
|||||||||||
Amortized |
Unrealized |
Unrealized |
Fair |
|||||||||
Cost |
Gains |
Losses |
Value |
|||||||||
(In Thousands) |
||||||||||||
At December 31, 2003 : |
||||||||||||
U.S. Treasury securities and |
||||||||||||
obligations of U.S. government |
||||||||||||
corporations and agencies |
$ 67,153 |
$ 5,688 |
$ 220 |
$ 72,621 |
||||||||
States, municipalities, |
||||||||||||
and political subdivisions |
6,734 |
190 |
161 |
6,763 |
||||||||
Foreign government |
292,962 |
26,846 |
2,237 |
317,571 |
||||||||
Foreign other |
1,736,130 |
99,965 |
13,903 |
1,822,192 |
||||||||
Public utilities securities |
1,246,494 |
75,325 |
5,969 |
1,315,850 |
||||||||
Corporate securities |
5,468,005 |
281,215 |
27,156 |
5,722,064 |
||||||||
Residential mortgage-backed securities |
4,292,587 |
70,281 |
61,563 |
4,301,305 |
||||||||
Commercial mortgage-backed securities |
296,227 |
18,464 |
3,197 |
311,494 |
||||||||
Other asset-backed securities |
960,402 |
12,790 |
46,086 |
927,106 |
||||||||
Total bonds |
14,366,694 |
590,764 |
160,492 |
14,796,966 |
||||||||
Preferred stocks |
12,520 |
- |
2,832 |
9,688 |
||||||||
Common stocks |
74,981 |
3,228 |
12 |
78,197 |
||||||||
Total equity securities |
87,501 |
3,228 |
2,844 |
87,885 |
||||||||
Total |
$ 14,454,195 |
$ 593,992 |
$ 163,336 |
$ 14,884,851 |
Reconciliation of bonds from amortized cost to carrying value is as follows: |
December 31 |
||||||||
2004 |
2003 |
|||||||
(In Thousands) |
||||||||
Amortized cost |
$ 13,130,333 |
$ 14,366,694 |
||||||
Less: nonadmitted bonds |
(949) |
(11,643) |
||||||
Carrying value |
$ 13,129,384 |
$ 14,355,051 |
As of December 31, 2004, the aggregate market value of debt securities with unrealized losses and the time period that cost exceeded fair value are as follows: |
More than 6 |
||||||||
months and less |
||||||||
Less than 6 |
than 12 months |
More than 12 |
||||||
months below cost |
below cost |
months below cost |
Total |
|||||
(In Thousands) |
||||||||
Fair value |
$ 1,738,913 |
$ 726,727 |
$ 664,598 |
$ 3,130,238 |
||||
Unrealized loss |
36,297 |
18,324 |
67,734 |
122,355 |
F-23 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Of the unrealized losses less than 6 months in duration of $36 million as of December 31, 2004, $31 million related to securities under the guidance prescribed by SSAP No. 43 Loan-backed and Structured Securities. This category includes U.S. government-backed securities, principal protected securities and structured securities which did not have an adverse change in cash flows for which the carrying amount was $1.3 billion. The remaining unrealized losses of $5 million are primarily related to interest rate movement or spread widening for other than credit-related reasons. Business and operating fundamentals are performing as expected. |
|
Of the losses more than 6 months and less than 12 months in duration of $18 million as of December 31, 2004, $15 million related to securities reviewed for impairment under the guidance prescribed by SSAP No. 43. This category includes U.S. government-backed securities, principal protected securities and structured securities which did not have an adverse change in cash flows for which the carrying amount was $619 million. The remaining unrealized losses of $3 million are primarily related to interest rate movement or spread widening for other than credit-related reasons. Business and operating fundamentals are performing as expected. |
|
Of the losses more than 12 months in duration of $68 million as of December 31, 2004, $63 million related to securities reviewed for impairment under the guidance prescribed by SSAP No. 43. This category includes U.S. government-backed securities, principal protected securities and structured securities which did not have an adverse change in cash flows for which the carrying amount was $617 million. The remaining unrealized losses of $5 million are primarily related to interest rate movement or spread widening for other than credit-related reasons. Business and operating fundamentals are performing as expected. |
|
The amortized cost and fair value of investments in bonds at December 31, 2004, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. |
Amortized |
Fair |
|||||||
Cost |
Value |
|||||||
(In Thousands) |
||||||||
Maturity: |
||||||||
Due in 1 year or less |
$ 581,684 |
$ 590,819 |
||||||
Due after 1 year through 5 years |
2,674,495 |
2,771,586 |
||||||
Due after 5 years through 10 years |
2,500,304 |
2,649,013 |
||||||
Due after 10 years |
2,256,665 |
2,397,640 |
||||||
8,013,148 |
8,409,058 |
|||||||
Residential mortgage-backed securities |
3,866,854 |
3,844,710 |
||||||
Commercial mortgage-backed securities |
410,176 |
424,651 |
||||||
Other asset-backed securities |
840,155 |
822,319 |
||||||
Total |
$ 13,130,333 |
$ 13,500,738 |
F-24 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
At December 31, 2004 and 2003, investments in certificates of deposit and bonds with an admitted asset value of $32,389,000 and $33,912,000, respectively, were on deposit with state insurance departments to satisfy regulatory requirements. |
|
The Company had loaned securities, which are reflected as invested assets on the balance sheets, with a market value of approximately $97,699,000 and $22,867,000, at December 31, 2004 and 2003, respectively. |
|
Proceeds from sales of investments in bonds and other fixed maturity interest securities were $5,053,021,000 and $6,978,722,000 in 2004 and 2003, respectively. Gross gains of $87,294,000 and $125,995,000 and gross losses of $30,901,000 and $39,944,000 during 2004 and 2003, respectively, were realized on those sales. A portion of the gains and losses realized in 2004 and 2003 has been deferred to future periods in the IMR. |
|
Realized capital gains (losses) are reported net of federal income taxes and amounts transferred to the IMR as follows: |
Year ended December 31 |
||||||||
2004 |
2003 |
|||||||
(In Thousands) |
||||||||
Realized capital gains (losses) |
$ 8,849 |
$ (7,000) |
||||||
Less amount transferred to IMR (net of related taxes of |
||||||||
$5,262 in 2004 and $11,083 in 2003) |
(9,772) |
(20,583) |
||||||
Less federal income taxes on realized capital gains |
(5,759) |
(24,269) |
||||||
Net realized capital losses |
$ (6,682) |
$ (51,852) |
In the course of the Company's asset management, securities are sold and reacquired within 30 days of the sale date to enhance the Company's return on the investment portfolio or to manage interest rate risk. |
|
The table below summarizes the number of transactions, book value, and gain/loss of the Company's financial instruments with securities sold and reacquired within 30 days of the sale date: |
Cost of |
||||||||
Number of |
Securities |
|||||||
Bonds |
Transactions |
Book Value |
Repurchased |
Gain |
||||
NAIC 3 |
59 |
$ 56,004,355 |
$ 60,993,989 |
$ 17,797 |
||||
NAIC 4 |
25 |
15,069,163 |
15,069,163 |
- |
||||
NAIC 5 |
1 |
2,879,593 |
2,879,593 |
- |
||||
NAIC 6 |
14 |
12,148,796 |
11,628,142 |
- |
F-25 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Major categories of net investment income are summarized as follows: |
Year ended December 31 |
||||||||
2004 |
2003 |
|||||||
(In Thousands) |
||||||||
Income: |
||||||||
Equity securities-unaffiliated |
$ 5,489 |
$ 8,330 |
||||||
Bonds |
808,164 |
810,205 |
||||||
Mortgage loans |
214,055 |
215,254 |
||||||
Contract loans |
64,798 |
75,109 |
||||||
Real estate |
3,875 |
4,698 |
||||||
Derivative investments |
(164,692) |
(175,836) |
||||||
Other |
(2,454) |
10,043 |
||||||
Total investment income |
929,235 |
947,803 |
||||||
Investment expenses |
(86,247) |
(68,321) |
||||||
Net investment income |
$ 842,988 |
$ 879,482 |
The Company entered into reverse dollar repurchase transactions to increase its return on investments and improve liquidity. Reverse dollar repurchases involve a sale of securities and an agreement to repurchase substantially the same securities as those sold. The reverse dollar repurchases are accounted for as short-term collateralized financing and the repurchase obligation is reported in borrowed money. The repurchase obligation totaled $438,404,000 and $255,715,000 at December 31, 2004 and 2003, respectively. The securities, underlying these agreements are mortgage-backed securities with a book value of $436,748,000 and $253,499,000 and fair value of $439,179,000 and $256,420,000 at December 31, 2004 and 2003, respectively. At December 31, 2004, the securities had a weighted average coupon rate of 5.5% and had maturities ranging from December 2019 through December 2034. The primary risk associated with short-term collateralized borrowings is that the counterparty may be unable to p erform under the terms of the contract. The Company's exposure is limited to the excess of the net replacement cost of the securities over the value of the short-term investments, which was not material at December 31, 2004. The Company believes that the counterparties to the reverse dollar repurchase agreements are financially responsible and that counterparty risk is minimal. |
|
The Company participates in reverse repurchase transactions. Such transactions include the sale of corporate securities to a major securities dealer and a simultaneous agreement to repurchase the same security in the near term. The proceeds are invested in new securities of intermediate durations. The terms of the reverse repurchase agreements call for payment of interest at a rate of 1.45%. The agreements mature prior to the end of January 2005. As of December 31, 2004 and 2003, the amount outstanding on these agreements was $115,200,000 and $36,200,000, respectively, and was included in borrowed money on the balance sheets. The securities underlying these agreements are mortgage-backed securities with a book value of $114,807,000 and $36,500,000 and fair value of $115,135,000 and $36,854,000 at December 31, 2004 and 2003, respectively. |
F-26 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
The securities have a weighted average coupon rate of 5.1% and have maturities ranging from October 2015 through January 2035. |
|
The Company is a member of the Federal Home Loan Bank of Topeka ("FHLB"). As a member of the FHLB, the Company has issued non-putable funding agreements with the FHLB. Assets with a book value of $1,348,717,000 collateralize these agreements. The reserves on these agreements were $1,161,216,000 at December 31, 2004. |
|
The maximum and minimum lending rates for long-term mortgage loans during 2004 were 6.58% and 3.35%. Fire insurance is required on all properties covered by mortgage loans and must at least equal the excess of the loan over the maximum loan which would be permitted by law on the land without the buildings. |
|
The maximum percentage of any loan to the value of collateral at the time of the loan, exclusive of insured or guaranteed or purchase money mortgages, was 75.5% on commercial properties. As of December 31, 2004, the Company held no mortgages with interest more than 180 days overdue. Total interest on past due mortgages was $88,027 and $90,467 as of December 31, 2004 and 2003, respectively. |
|
4. |
Derivative Financial Instruments Held for Purposes Other than Trading |
The Company only uses derivatives for hedging purposes by entering into derivatives such as swaps, caps, floors, and options to reduce and manage risks, which include the risk of a change in the value, yield, price, cash flows, exchange rates or quantity of, or a degree of exposure with respect to, assets, liabilities, or future cash flows which the Company has acquired or incurred. The Company's hedge accounting practices are in accordance with the requirements set in SSAP No. 86. |
|
The Company uses interest rate swaps to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities. Interest rate swap agreements generally involve the exchange of fixed and floating interest payments over the life of the agreement without an exchange of the underlying principal amount. Currency swap agreements generally involve the exchange of local and foreign currency payments over the life of the agreement without an exchange of the underlying principal amount. |
|
Interest rate cap and interest rate floor agreements owned entitle the Company to receive payments to the extent reference interest rates exceed or fall below strike levels in the contracts based on the notional amounts. |
|
Premiums paid for the purchase of interest rate contracts are included in other invested assets on the balance sheets and are being amortized to interest expense over the remaining terms of the contracts or in a manner consistent with the financial instruments being hedged. |
F-27 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Amounts paid or received, if any, from such contracts are included in interest expense or income on the statements of operations. Accrued amounts payable to or receivable from counterparties are included in other liabilities or other invested assets. |
|
Gains or losses realized as a result of early terminations of interest rate contracts are amortized to investment income over the remaining term of the items being hedged to the extent the hedge is considered to be effective; otherwise, they are recognized upon termination. Changes in the fair value of effective hedge derivatives are recorded as investment income. Changes in the fair value of ineffective hedge derivatives are recorded as unrealized gains and losses in surplus. The Company manages the potential credit exposure from interest rate contracts through careful evaluation of the counterparties' credit standing, collateral agreements, and master netting agreements. |
|
Interest rate contracts that are matched or otherwise designated to be associated with other financial instruments are recorded at fair value if the related financial instruments mature, are sold, or are otherwise terminated or if the interest rate contracts cease to be effective hedges. Changes in the fair value of derivatives are recorded as unrealized gains and losses. The Company manages the potential credit exposure from interest rate contracts through careful evaluation of the counterparties' credit standing, collateral agreements, and master netting agreements. |
|
The Company is exposed to credit loss in the event of nonperformance by counterparties on interest rate contracts; however, the Company does not anticipate nonperformance by any of these counterparties. The amount of such exposure is generally the unrealized gains in such contracts. |
|
The table below summarizes the Company's interest rate contracts included in other invested assets at December 31, 2004 and 2003: |
Notional |
Carrying |
Fair |
||||||||
Amount |
Value |
Value |
||||||||
(In Thousands) |
||||||||||
December 31, 2004 |
||||||||||
Swaps |
$ 9,245,973 |
$ (1,433) |
$ (119,788) |
|||||||
Caps owned |
195,100 |
2,132 |
263 |
|||||||
Options owned |
40,000 |
1,032 |
1,032 |
|||||||
Total derivatives |
$ 9,481,073 |
$ 1,731 |
$ (118,493) |
|||||||
December 31, 2003 |
||||||||||
Swaps |
$ 9,977,615 |
$ 5,533 |
$ (233,030) |
|||||||
Caps owned |
525,151 |
4,498 |
747 |
|||||||
Options owned |
42,000 |
4,025 |
4,025 |
|||||||
Total derivatives |
$ 10,544,766 |
$ 14,056 |
$ (228,258) |
F-28 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
5. |
Concentrations of Credit Risk |
The Company held less-than-investment-grade corporate bonds with an aggregate book value of $894,302,000 and $1,011,304,000 and an aggregate market value of $935,881,000 and $1,050,506,000 at December 31, 2004 and 2003, respectively. Those holdings amounted to 6.8% of the Company's investments in bonds and 4.7% of total admitted assets at December 31, 2004. The holdings of less-than-investment-grade bonds are widely diversified and of satisfactory quality based on the Company's investment policies and credit standards. |
|
The Company held unrated bonds of $258,641,000 and $320,363,000 with an aggregate NAIC market value of $263,535,000 and $322,460,000 at December 31, 2004 and 2003, respectively. The carrying value of these holdings amounted to 2.0% of the Company's investment in bonds and 1.3% of the Company's total admitted assets at December 31, 2004. |
|
At December 31, 2004, the Company's commercial mortgages involved a concentration of properties located in California (17.1%) and Florida (9.5%). The remaining commercial mortgages relate to properties located in 43 other states. The portfolio is well diversified, covering many different types of income-producing properties on which the Company has first mortgage liens. The maximum mortgage outstanding on any individual property is $52,072,000. |
|
6. |
Annuity Reserves |
At December 31, 2004 and 2003, the Company's annuity reserves, including those held in separate accounts and deposit fund liabilities that are subject to discretionary withdrawal (with adjustment), subject to discretionary withdrawal without adjustment, and not subject to discretionary withdrawal provisions are summarized as follows: |
Amount |
Percent |
||||||||
(In Thousands) |
|||||||||
December 31, 2004 |
|||||||||
Subject to discretionary withdrawal (with adjustment): |
|||||||||
With market value adjustment |
$ 1,829,152 |
20.8 |
% |
||||||
At book value less surrender charge |
25,927 |
0.3 |
|
||||||
Subtotal |
1,855,079 |
21.1 |
|||||||
Subject to discretionary withdrawal (without adjustment): |
|||||||||
At book value with minimal or no charge or adjustment |
115,996 |
1.3 |
|||||||
Not subject to discretionary withdrawal |
6,823,528 |
77.6 |
|
||||||
Total annuity reserves and deposit fund liabilities |
|||||||||
before reinsurance |
8,794,603 |
100.0 |
% |
||||||
Less reinsurance ceded |
- |
||||||||
Net annuity reserves and deposit fund liabilities |
$ 8,794,603 |
F-29 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Amount |
Percent |
||||||||
(In Thousands) |
|||||||||
December 31, 2003 |
|||||||||
Subject to discretionary withdrawal (with adjustment): |
|||||||||
With market value adjustment |
$ 2,954,534 |
28.6 |
% |
||||||
At book value less surrender charge |
31,470 |
0.3 |
|
||||||
Subtotal |
2,986,004 |
28.9 |
|||||||
Subject to discretionary withdrawal (without adjustment): |
|||||||||
At book value with minimal or no charge or adjustment |
311,264 |
3.0 |
|||||||
Not subject to discretionary withdrawal |
7,044,158 |
68.1 |
|
||||||
Total annuity reserves and deposit fund liabilities |
|||||||||
before reinsurance |
10,341,426 |
100.0 |
% |
||||||
Less reinsurance ceded |
11,761 |
||||||||
Net annuity reserves and deposit fund liabilities |
$ 10,329,665 |
The amount of insurance in force for which the gross premiums are less than the net premiums, according to the standard of valuation required by the Colorado Division of Insurance, is $1,796,631,000 at December 31, 2004. The amount of premium deficiency reserves for policies on which gross premiums are less than the net premiums is $71,000,000 at December 31, 2004. The Company anticipates investment income as a factor in the premium deficiency calculation, in accordance with SSAP No. 54, Individual and Group Accident and Health Contracts. |
F-30 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
7. |
Employee Benefit Plans |
Pension Plan and Postretirement Benefits |
|
The Company sponsors non-contributory defined benefit pension plans covering United States employees. The Company also provides certain health care and life insurance benefits for retired employees. |
|
A summary of assets, obligations and assumptions of the pension and other postretirement benefit plans are as follows: |
Pension Benefits |
Other Benefits |
|||||||||||
2004 |
2003 |
2004 |
2003 |
|||||||||
(In Thousands) |
||||||||||||
Change in benefit obligation |
||||||||||||
Benefit obligation at beginning of year |
$ 10,159 |
$ 11,433 |
$ 6,937 |
$ 5,658 |
||||||||
Service cost |
- |
- |
535 |
430 |
||||||||
Interest cost |
606 |
752 |
420 |
359 |
||||||||
Contribution by plan participants |
- |
- |
395 |
367 |
||||||||
Actuarial gain (loss) |
7,222 |
(1,002) |
(1,281) |
926 |
||||||||
Benefits paid |
(1,046) |
(1,024) |
(773) |
(804) |
||||||||
Plan amendments |
(3) |
- |
- |
- |
||||||||
Business combinations |
- |
- |
175 |
- |
||||||||
Benefit obligation at end of year |
$ 16,938 |
$ 10,159 |
$ 6,408 |
$ 6,937 |
||||||||
Change in plan assets |
||||||||||||
Fair value of plan assets at beginning of year |
$ - |
$ - |
$ - |
$ - |
||||||||
Employer contribution |
1,046 |
1,024 |
378 |
437 |
||||||||
Plan participants' contributions |
- |
- |
395 |
367 |
||||||||
Benefits paid |
(1,046) |
(1,024) |
(773) |
(804) |
||||||||
Fair value of plan assets at end of year |
$ - |
$ - |
$ - |
$ - |
F-31 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Pension Benefits |
Other Benefits |
|||||||||||
2004 |
2003 |
2004 |
2003 |
|||||||||
(In Thousands) |
||||||||||||
Funded status |
$ (16,938) |
$ (10,159) |
$ (6,408) |
$ (6,937) |
||||||||
Unamortizated prior service credit |
(369) |
(402) |
(1,532) |
(1,971) |
||||||||
Unrecognized net gain/(loss) |
3,929 |
(3,667) |
(1,406) |
27 |
||||||||
Remaining net obligation |
10,314 |
10,959 |
- |
- |
||||||||
Net amount recorded |
$ (3,064) |
$ (3,269) |
$ (9,346) |
$ (8,881) |
||||||||
Components of net periodic benefit cost |
||||||||||||
Service cost |
$ - |
$ - |
$ 535 |
$ 430 |
||||||||
Interest cost |
606 |
752 |
- |
359 |
||||||||
Amortization of unrecognized transition |
||||||||||||
obligationortransitionasset |
645 |
645 |
- |
- |
||||||||
Amount of recognized gains and losses |
(373) |
(208) |
(24) |
(64) |
||||||||
Amount of prior service cost recognized |
(36) |
(36) |
(281) |
(123) |
||||||||
Amount of gain or loss recognized due to a |
||||||||||||
settlementorcurtailment |
- |
- |
177 |
- |
||||||||
Temporary deviation cost |
- |
- |
17 |
- |
||||||||
Total net periodic benefit cost |
$ 842 |
$ 1,153 |
$ 424 |
$ 602 |
||||||||
Benefit obligation for nonvested employees |
$ - |
$ 59 |
$ 626 |
$ 3,376 |
Assumptions used in determining the accounting for the supplemental employees retirement plan and other post-retirement benefit plans as of December 31, 2004 and 2003 were as follows: |
Pension Benefits |
Other Benefits |
|||||||||||||||
2004 |
2003 |
2004 |
2003 |
|||||||||||||
Weighted-average discount rate |
6.00 |
% |
6.25 |
% |
6.00 |
% |
6.25 |
% |
||||||||
Rate of increase in compensation level |
4.00 |
% |
3.75 |
% |
4.00 |
% |
3.75 |
% |
||||||||
Expected long-term rate of return on assets |
8.25 |
% |
8.75 |
% |
8.25 |
% |
8.75 |
% |
The annual assumed rate of increase in the per capita cost of covered benefits (i.e. health care cost trend rate) for the medical plan is 10%, decreasing gradually to 5% for 2009 and thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation for the medical plan as of December 31, 2004 by $74,000. Decreasing the assumed health care cost trend rates by one percentage point in each year would decrease the accumulated postretirement benefit obligation for the medical plan as of December 31, 2004 by $71,000. |
F-32 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
401(k) Plan |
|
The ING Savings Plan is a defined contribution plan, which is available to substantially all employees. Participants may make contributions to the plan through salary reductions up to a maximum of $13,000 for 2004 and $12,000 for 2003. Such contributions are not currently taxable to the participants. The Company matches up to 6% of pre-tax eligible pay at 100%. Company matching contributions were $2,714,000 and $1,902,000 for 2004 and 2003, respectively. |
|
8. |
Separate Accounts |
Separate account assets and liabilities represent funds segregated by the Company for the benefit of certain policy and contract holders who bear the investment risk. Revenues and expenses on the separate account assets and related liabilities equal the benefits paid to the separate account policy and contract holders. |
|
The general nature and characteristics of the separate accounts business follows: |
Non-Indexed |
Non- |
|||||||||
Guarantee |
Guaranteed |
|||||||||
Less than/ |
Separate |
|||||||||
equal to 4% |
Accounts |
Total |
||||||||
(In Thousands) |
||||||||||
December 31, 2004 |
||||||||||
Premium, consideration or deposits for the year |
$ - |
$ 18,109 |
$ 18,109 |
|||||||
Reserves for separate accounts with assets at: |
||||||||||
Fair value |
$ - |
$ 1,129,982 |
$ 1,129,982 |
|||||||
Amortized cost |
751,460 |
- |
751,460 |
|||||||
Total reserves |
$ 751,460 |
$ 1,129,982 |
$ 1,881,442 |
|||||||
Reserves for separate accounts by |
||||||||||
withdrawal characteristics: |
||||||||||
Subject to descretionary withdrawal: |
||||||||||
With market value adjustment |
$ - |
$ - |
$ - |
|||||||
At book value without market value adjustment |
||||||||||
and with current surrender charge of 5% or more |
- |
515,275 |
515,275 |
|||||||
At market value |
- |
- |
- |
|||||||
At book value without market value adjustment |
||||||||||
and with current surrender charge less than 5% |
- |
614,707 |
614,707 |
|||||||
Subtotal |
- |
1,129,982 |
1,129,982 |
|||||||
Not subject to discretionary withdrawal |
751,460 |
- |
751,460 |
|||||||
Total separate account aggregate reserves |
$ 751,460 |
$ 1,129,982 |
$ 1,881,442 |
F-33 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Non-Indexed |
Non- |
|||||||||
Guarantee |
Guaranteed |
|||||||||
Less than/ |
Separate |
|||||||||
equal to 4% |
Accounts |
Total |
||||||||
(In Thousands) |
||||||||||
December 31, 2003 |
||||||||||
Premium, consideration or deposits for the year |
$ - |
$ 183,589 |
$ 183,589 |
|||||||
Reserves for separate accounts with assets at: |
||||||||||
Fair value |
$ - |
$ 1,040,884 |
$ 1,040,884 |
|||||||
Amortized cost |
750,901 |
- |
750,901 |
|||||||
Total reserves |
$ 750,901 |
$ 1,040,884 |
$ 1,791,785 |
|||||||
Reserves for separate accounts by |
||||||||||
withdrawal characteristics: |
||||||||||
Subject to descretionary withdrawal: |
||||||||||
With market value adjustment |
$ - |
$ - |
$ - |
|||||||
At book value without market value adjustment |
||||||||||
and with current surrender charge of 5% or more |
- |
520,938 |
520,938 |
|||||||
At market value |
- |
- |
- |
|||||||
At book value without market value adjustment |
||||||||||
and with current surrender charge less than 5% |
- |
519,946 |
519,946 |
|||||||
Subtotal |
- |
1,040,884 |
1,040,884 |
|||||||
Not subject to discretionary withdrawal |
750,901 |
- |
750,901 |
|||||||
Total separate account aggregate reserves |
$ 750,901 |
$ 1,040,884 |
$ 1,791,785 |
A reconciliation of the amounts transferred to and from the separate accounts is presented below: |
Year ended |
||||||||
December 31 |
||||||||
2004 |
2003 |
|||||||
(In Thousands) |
||||||||
Transfers as reported in the Summary of Operations |
||||||||
of the Separate Accounts Statement: |
||||||||
Transfers to separate accounts |
$ 215,286 |
$ 183,710 |
||||||
Transfers from separate accounts |
(122,906) |
(124,197) |
||||||
Transfers as reported in the Statement of Operations |
$ 92,380 |
$ 59,513 |
F-34 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
9. |
Reinsurance |
The Company is involved in both ceded and assumed reinsurance with other companies for the purpose of diversifying risk and limiting exposure on larger risks. To the extent that the assuming companies become unable to meet their obligations under these treaties, the Company remains contingently liable to its policyholders for the portion reinsured. To minimize its exposure to significant losses from retrocessionaire insolvencies, the Company evaluates the financial condition of the retrocessionaire and monitors concentrations of credit risk. |
|
Assumed premiums amounted to $1,080,056,000 and $1,008,921,000 for the years ended December 31, 2004 and 2003, respectively. |
|
The Company's ceded reinsurance arrangements reduced certain items in the accompanying financial statements by the following amounts: |
December 31 |
||||||||
2004 |
2003 |
|||||||
(In Thousands) |
||||||||
Premiums |
$ 1,302,645 |
$ 1,204,572 |
||||||
Benefits paid or provided |
647,397 |
448,297 |
||||||
Policy and contract liabilities at year end |
4,455,875 |
2,810,721 |
During 2004 and 2003, the Company had ceded blocks of insurance under reinsurance treaties to provide funds for financing and other purposes. These reinsurance transactions, generally known as "financial reinsurance," represent financing arrangements. Financial reinsurance has the effect of increasing current statutory surplus while reducing future statutory surplus as the reinsurers recapture amounts. |
|
10. |
Federal Income Taxes |
The Company and its subsidiaries file a consolidated federal income tax return with its parent, ING AIH, and other U.S. affiliates and subsidiaries. The method of tax allocation is governed by a written tax sharing agreement. The tax sharing agreement provides that each member of the consolidated return shall reimburse ING AIH for its respective share of the consolidated federal income tax liability and shall receive a benefit for its losses at the statutory rate. |
F-35 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
The components of the net deferred tax asset (liability) are as follows: |
December 31 |
||||
2004 |
2003 |
|||
(In Thousands) |
||||
Total deferred tax assets |
$ 295,381 |
$ 411,280 |
||
Total deferred tax liabilities |
(53,624) |
(39,977) |
||
Net deferred tax assets |
241,757 |
371,303 |
||
Deferred tax asset nonadmitted |
(171,861) |
(290,383) |
||
Net admitted deferred tax asset |
$ 69,896 |
$ 80,920 |
||
Decrease (increase) in nonadmitted asset |
$ 118,522 |
$ (55,978) |
Current income taxes incurred consisted of the following major components: |
Year ended December 31 |
|||||||||
2004 |
2003 |
||||||||
(In Thousands) |
|||||||||
Federal tax (benefit) expense on operations |
$ (143,489) |
$ 128,340 |
|||||||
Federal tax benefit on capital gains |
5,759 |
24,269 |
|||||||
Total current tax (benefit) expense |
$ (137,730) |
$ 152,609 |
The main components of deferred tax assets and deferred tax liabilities are as follows: |
December 31 |
||||||||
2004 |
2003 |
|||||||
(In Thousands) |
||||||||
Deferred tax assets resulting from book/tax differences in: |
||||||||
Deferred acquisition costs |
$ 123,663 |
$ 177,349 |
||||||
Insurance reserves |
62,983 |
98,914 |
||||||
Investments |
57,621 |
68,338 |
||||||
Compensation and employee benefits |
30,462 |
22,431 |
||||||
Due and deferred premium |
- |
13,343 |
||||||
Nonadmitted assets |
2,690 |
11,376 |
||||||
Unrealized loss on investments |
3,070 |
3,735 |
||||||
Litigation accruals |
5,384 |
8,766 |
||||||
Depreciable assets |
4,750 |
4,737 |
||||||
Other |
4,758 |
2,291 |
||||||
Total deferred tax assets |
295,381 |
411,280 |
||||||
Deferred tax assets nonadmitted |
(171,861) |
(290,383) |
||||||
Admitted deferred tax assets |
123,520 |
120,897 |
||||||
Deferred tax liabilities resulting from book/tax differences in: |
||||||||
Insurance reserves |
4,770 |
10,400 |
||||||
Investments |
31,476 |
5,694 |
||||||
Due and deferred premiums |
7,773 |
22,969 |
||||||
Other |
9,605 |
914 |
||||||
Total deferred tax liabilities |
53,624 |
39,977 |
||||||
Net admitted deferred tax asset |
$ 69,896 |
$ 80,920 |
F-36 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
The change in net deferred income taxes is comprised of the following: |
December 31 |
||||||||||
2004 |
2003 |
Change |
||||||||
(In Thousands) |
||||||||||
Total deferred tax assets |
$ 295,381 |
$ 411,280 |
$ (115,899) |
|||||||
Total deferred tax liabilities |
53,624 |
39,977 |
13,647 |
|||||||
Net deferred tax asset |
$ 241,757 |
$ 371,303 |
(129,546) |
|||||||
Remove current year change in unrealized gains |
(664) |
|||||||||
Change in net deferred income tax |
(128,882) |
|||||||||
Remove other items in surplus: |
||||||||||
Current year change in non-admitted assets |
9,496 |
|||||||||
Additional minimum pension liability |
(503) |
|||||||||
Change in deferred taxes for rate reconciliation |
$ (119,889) |
The provision for federal income tax expense and change in deferred taxes differs from the amount from that which would be obtained by applying the statutory federal income tax rate to income (including capital items) before income taxes for the following reasons: |
Year Ended |
||||||
December 31, 2004 |
||||||
(In Thousands) |
||||||
Ordinary loss |
$ (95,528) |
|||||
Capital losses |
(924) |
|||||
Total pre-tax book loss |
$ (96,452) |
|||||
Provision computed at statutory rate |
$ (33,758) |
|||||
Reserves |
7,000 |
|||||
Interest maintenance reserve |
7,668 |
|||||
Dividend received deduction |
(609) |
|||||
Refinement of deferred tax balances |
6,973 |
|||||
Amortization of reinsurance gain |
(7,061) |
|||||
Other |
1,946 |
|||||
Total |
$ (17,841) |
|||||
Federal income tax benefit |
$ (137,730) |
|||||
Change in net deferred income taxes |
119,889 |
|||||
Total statutory income tax benefit |
$ (17,841) |
F-37 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
The amount of federal income taxes incurred that will be available for recoupment in the event of future net losses is $0 and $125,116,372 from 2004 and 2003, respectively. |
|
Under the inter-company tax sharing agreement, the Company has a receivable from ING AIH of $65,092,000 and a payable to ING AIH of $24,276,000 for federal income taxes as of December 31, 2004 and 2003, respectively. |
|
Under prior law, life insurance companies were allowed to defer from taxation a portion of income. The deferred income was accumulated in the Policyholders' Surplus Account. This deferred income only becomes taxable under certain conditions, which management believes to be remote. Furthermore, the American Jobs Creation Act of 2004 allows certain tax-free distributions from the Policyholders' Surplus Account during 2005 and 2006. Therefore, based on currently available information, no federal income taxes have been provided on the Company's Policyholders' Surplus Account accumulated balance of $60,490,000. |
|
11. |
Investment in and Advances to Subsidiaries |
The Company has one wholly owned insurance subsidiary at December 31, 2004, Midwestern United Life Insurance Company ("Midwestern United"). The Company also has three wholly owned noninsurance subsidiaries: First Secured Mortgage Deposit Corporation, ING America Equities, Inc. ("IAE"), and Draft Funding LLC. |
|
IAE is a wholesale broker/dealer whose business activities consist only of the distribution of variable life and annuity contracts. IAE does not hold customer funds or securities. |
|
Amounts invested in and advanced to the Company's subsidiaries are summarized as follows: |
December 31 |
||||||||
2004 |
2003 |
|||||||
(In Thousands) |
||||||||
Common stock (cost-$40,746 in 2004 and 2003) |
$ 83,962 |
$ 76,187 |
Summarized financial information for these subsidiaries is as follows: |
December 31 |
||||||||
2004 |
2003 |
|||||||
(In Thousands) |
||||||||
Revenues |
$ 50,200 |
$ 56,962 |
||||||
Income before net realized gains on investments |
8,939 |
2,884 |
||||||
Net income |
5,664 |
3,267 |
||||||
Admitted assets |
261,411 |
258,403 |
||||||
Liabilities |
177,449 |
182,216 |
F-38 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
12. |
Capital and Surplus |
Under Colorado insurance regulations, the Company is required to maintain a minimum total capital and surplus of $1,500,000. Additionally, the amount of dividends which can be paid by the Company to its shareholder without prior approval of the Colorado Division of Insurance is limited to the greater of the net gain from operations or 10% of surplus at December 31 of the preceding year. |
|
Life and health insurance companies are subject to certain Risk-Based Capital ("RBC") requirements as specified by the NAIC. Under those requirements, the amount of capital and surplus maintained by a life and health insurance company is to be determined based on the various risk factors related to it. At December 31, 2004, the Company meets the RBC requirements. |
|
The Company has two surplus notes to a related party for $65,032,000 and $100,000,000, which represent the cumulative cash draws on two $100,000,000 commitments issued by ING AIH through December 31, 2004, less principal payments. The surplus notes bear interest at a variable rate equal to the prevailing rate for 10-year U.S. Treasury bonds plus 1/4%, adjusted annually. The principal sum plus accrued interest shall be repaid in five annual installments beginning April 15, 2017 and continuing through April 15, 2021 ("Repayment Period"). The repayment amount shall be determined and adjusted annually on the last day of December, commencing December 31, 2016, and shall be an amount calculated to amortize any unpaid principal plus accrued interest over the years remaining in the Repayment Period. |
|
The repayment of these notes are payable only out of surplus funds of the Company and only at such time as the surplus of the Company, after payment is made, does not fall below the prescribed level. There were no principal or interest payments in 2004 or 2003. |
|
13. |
Fair Values of Financial Instruments |
In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the financial instrument. Accordingly, the aggregate fair value amounts presented herein do not represent the underlying value of the Company. |
F-39 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Life insurance liabilities that contain mortality risk and all nonfinancial instruments have been excluded from the disclosure requirements. However, the fair values of liabilities under all insurance contracts are taken into consideration in the Company's overall management of interest rate risk, such that the Company's exposure to changing interest rates is minimized through the matching of investment maturities with amounts due under insurance contracts. |
|
The carrying amounts and fair values of the Company's financial instruments are summarized as follows: |
December 31 |
||||||||||||
2004 |
2003 |
|||||||||||
Carrying |
Fair |
Carrying |
Fair |
|||||||||
Amount |
Value |
Amount |
Value |
|||||||||
(In Thousands) |
||||||||||||
Assets: |
||||||||||||
Bonds |
$ 13,129,384 |
$ 13,500,738 |
$ 14,355,051 |
$ 14,796,965 |
||||||||
Preferred stocks |
20,325 |
18,281 |
12,520 |
9,688 |
||||||||
Unaffiliated common stocks |
75,063 |
75,063 |
78,197 |
78,197 |
||||||||
Mortgage loans |
3,283,563 |
3,456,218 |
3,360,613 |
3,607,791 |
||||||||
Contract loans |
1,155,638 |
1,155,638 |
1,157,009 |
1,157,009 |
||||||||
Derivative securities |
1,731 |
(118,493) |
14,056 |
(228,258) |
||||||||
Short-term investments |
775,500 |
775,500 |
278,270 |
278,270 |
||||||||
Cash |
66,529 |
66,529 |
158,564 |
158,564 |
||||||||
Investment in surplus notes |
35,000 |
46,890 |
35,000 |
45,677 |
||||||||
Indebtedness from related parties |
19 |
19 |
14 |
14 |
||||||||
Separate account assets |
1,974,914 |
1,974,914 |
1,830,315 |
1,830,315 |
||||||||
Receivable for securities |
20,425 |
20,425 |
98,277 |
98,277 |
||||||||
Liabilities: |
||||||||||||
Individual and group annuities |
1,665,348 |
1,696,346 |
2,184,519 |
2,265,574 |
||||||||
Deposit type contract |
6,336,731 |
6,342,498 |
7,351,074 |
8,117,203 |
||||||||
Policyholder funds |
6,243 |
6,243 |
6,523 |
6,523 |
||||||||
Indebtedness to related parties |
11,058 |
11,058 |
50,688 |
50,688 |
||||||||
Separate account liabilities |
1,962,045 |
1,962,045 |
1,811,812 |
1,811,812 |
||||||||
Payable for securities |
12,057 |
12,057 |
65,097 |
65,097 |
The following methods and assumptions were used by the Company in estimating the fair value disclosures for financial instruments in the accompanying financial statements and notes thereto: |
||
Cash and short-term investments: The carrying amounts reported in the accompanying balance sheets for these financial instruments approximate their fair values. |
F-40 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Bonds and equity securities: The fair values for bonds, preferred stocks and common stocks reported herein are based on quoted market prices, where available. For securities not actively traded, fair values are estimated using values obtained from independent pricing services or, in the case of private placements, collateralized mortgage obligations and other mortgage derivative investments, are estimated by discounting the expected future cash flows. The discount rates used vary as a function of factors such as yield, credit quality, and maturity, which fall within a range between 3.4% and 17.6% over the total portfolio. Fair values determined on this basis can differ from values published by the SVO. Fair value as determined by the SVO as of December 31, 2004 and 2003 is $13,684,062,000 and $14,576,839,000, respectively. |
||
Mortgage loans: Estimated fair values for commercial real estate loans were generated using a discounted cash flow approach. Loans in good standing are discounted using interest rates determined by U.S. Treasury yields on December 31 and spreads applied on new loans with similar characteristics. The amortizing features of all loans are incorporated in the valuation. Where data on option features is available, option values are determined using a binomial valuation method, and are incorporated into the mortgage valuation. Restructured loans are valued in the same manner; however, these loans were discounted at a greater spread to reflect increased risk. All residential loans are valued at their outstanding principal balances, which approximate their fair values. |
||
Derivative financial instruments: Fair values for on-balance-sheet derivative financial instruments (caps and floors) and off-balance-sheet derivative financial instruments (swaps) are based on broker/dealer valuations or on internal discounted cash flow pricing models, taking into account current cash flow assumptions and the counterparties' credit standing. |
||
Investment in surplus notes: Estimated fair values in surplus notes were generated using a discounted cash flow approach. Cash flows were discounted using interest rates determined by U.S. Treasury yields on December 31 and spreads applied on surplus notes with similar characteristics. |
||
Guaranteed investment contracts: The fair values of the Company's guaranteed investment contracts are estimated using discounted cash flow calculations, based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. |
||
Off-balance-sheet instruments: The Company accepted additional deposits on existing synthetic guaranteed investment contracts in the amounts of $64,925,000 and $283,806,000 in 2004 and 2003, respectively, from trustees of 401(k) plans. Pursuant to the terms of these contracts, the trustees own and retain the assets related to these December 31, 2004 contracts. Such assets had a book value of $573,500,000 and |
F-41 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
$1,086,097,000 at December 31, 2004 and 2003, respectively. Under synthetic guaranteed investment contracts, the synthetic issuer may assume interest rate risk on individual plan participant initiated withdrawals from stable value options of 401(k) plans. Approximately 100% of the synthetic guaranteed investment contract book values are on a participating basis and have a credited interest rate reset mechanism, which passes such interest rate risk to plan participants. |
||
Other investment-type insurance contracts: The fair values of the Company's deferred annuity contracts are estimated based on the cash surrender values. The carrying values of other policyholder liabilities, including immediate annuities, dividend accumulations, supplementary contracts without life contingencies, and premium deposits, approximate their fair values. |
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The carrying value of all other financial instruments approximates their fair value. |
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14. |
Commitments and Contingencies |
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The Company is a party to threatened or pending lawsuits arising from the normal conduct of business. Due to the climate in insurance and business litigation, suits against the Company sometimes include claims for substantial compensatory, consequential or punitive damages and other types of relief. Moreover, certain claims are asserted as class actions, purporting to represent a group of similarly situated individuals. While it is not possible to forecast the outcome of pending lawsuits, in light of existing insurance, reinsurance and established reserves, it is the opinion of management that the disposition of such lawsuits will not have a materially adverse effect on the Company's operations or financial position. |
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The Company guarantees certain contractual policy obligations of its subsidiary, Midwestern United. In the unlikely event that Midwestern United was unable to fulfill its obligations to policyholders, the Company would be obligated to assume the guaranteed policy obligations, but any ultimate contingent losses in connection with such guarantees will not have a material adverse impact on the Company's future operations or financial position. |
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Guarantee Agreement |
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The Company, effective January 2002, entered into a Guarantee Agreement with two other ING affiliates whereby it is jointly and severally liable for $250,000,000 obligation of SLDI. The Company's Board of Directors approved this transaction on April 25, 2002. The other two affiliated life insurers were ReliaStar Life Insurance Company and Security-Connecticut (subsequently merged into ReliaStar Life Insurance Company on October 1, 2003). The joint and several guarantees of the two insurers are capped at $250,000,000. The States of Colorado and Minnesota did not disapprove the guarantee. |
F-42 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Assets and liabilities, and the related revenues and expenses recorded as a result of transactions and agreements with affiliates may not be the same as those recorded if the Company was not a wholly-owned subsidiary of its parent. |
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Information Concerning Parent, Subsidiaries and Affiliates |
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ING Verzekeringen N.V. ("INGV") has an agreement with the Company whereby INGV will provide up to $5 billion of liquidity upon the occurrence of a predefined trigger event to facilitate timely payment by the Company of its GIC obligations. This liquidity facility, which is not a payment guarantee and may not be relied upon by any GIC owner or any party holding a beneficial interest in a GIC, is in effect until June 30, 2005, unless sooner terminated through contractually defined events. The Company also has a reciprocal line of credit with ING AIH for the purpose of managing short-term liquidity. |
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Leases |
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The Company leases office space under various non-cancelable operating lease agreements that expire July 2009. During the years ended December 31, 2004 and 2003, rent expense totaled $660,000 and $1,823,000, respectively. At December 31, 2004, the minimum aggregate rental commitments for the upcoming five years were: 2005 - $446,000; 2006 - $213,000; 2007 - $147,000; 2008 - $10,000; 2009 - $2,000. |
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Certain rental commitments have renewal options extending through the year 2009 subject to adjustments in the future periods. |
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The Company is not involved in any material sale-leaseback transactions. |
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Other Commitments |
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As part of its overall investment strategy, the Company has entered into agreements to purchase securities of $579,677,000 and $374,679,000 at December 31, 2004 and 2003, respectively, to provide additional capital contributions of $62,823,000 and $26,058,000 at December 31, 2004 and 2003, respectively, in partnerships reported in other invested assets on the balance sheets. |
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Regulatory Matters |
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As with many financial services companies, the Company and its affiliates have received informal and formal requests for information from various state and federal governmental agencies and self-regulatory organizations in connection with inquiries and investigations of the products and practices of the financial services industry. In each case, the Company and its affiliates have been and are providing full cooperation. |
F-43 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Other Regulatory Matters |
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The New York Attorney General and other regulators are also conducting broad inquiries and investigations involving the insurance industry. These initiatives currently focus on, among other things, compensation and other sales incentives, potential conflicts of interest, potential anti-competitive activity, marketing practices, certain financial reinsurance arrangements, and disclosure. It is likely that the scope of these investigations will further broaden before the investigations are concluded. U.S. affiliates of ING have received formal and informal requests in connection with such investigations, and are cooperating fully with each request for information. |
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These initiatives may result in new legislation and regulation that could significantly affect the financial services industry, including businesses in which the Company is engaged. |
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In light of these and other developments, U.S. affiliates of ING, including the Company, periodically review whether modifications to their business practices are appropriate. |
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16. |
Financing Agreements |
The Company maintains a revolving loan agreement with SunTrust Bank, Atlanta (the "Bank"). Under this agreement, which expires July 30, 2005, the Company can borrow up to $125,000,000 from the Bank. Interest on any borrowing accrues at an annual rate equal to: (1) the cost of funds for the Bank for the period applicable for the advance plus 0.225% or (2) a rate quoted by the Bank to the Company for the borrowing. Under this agreement, the Company incurred interest expense of $0 and $9,000 for the years ended December 31, 2004 and 2003, respectively. Additionally, there were no amounts payable to the Bank at December 31, 2004 or 2003. |
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The Company also maintains a revolving loan agreement with Bank of New York, New York ("BONY"). Under this agreement, the Company can borrow up to $100,000,000 from BONY. Interest on any borrowing accrues at an annual rate equal to: (1) the cost of funds for BONY for the period applicable for the advance plus 0.35% or (2) a rate quoted by BONY to the Company for the borrowing. Under this agreement, the Company incurred interest expense of $0 and $10,000 for the years ended December 31, 2004 and 2003, respectively. Additionally, there were no amounts payable to BONY at December 31, 2004 or 2003. |
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The Company borrowed $2,971,021,000 and repaid $3,057,371,000 in 2004 and borrowed $3,854,865,000 and repaid $3,768,515,000 in 2003. These borrowings were on a short-term basis, at an interest rate that approximated current money market rates and excludes borrowings from reverse dollar repurchase transactions. Interest paid on borrowed money was $386,000 and $530,000, during 2004 and 2003, respectively. |
F-45 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
17. |
Related Party Transactions |
Affiliates |
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Management and service contracts and all cost sharing arrangements with other affiliated ING United States life insurance companies are allocated among companies in accordance with normal, generally accepted expense and cost allocation methods. |
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Investment Management: The Company has entered into an asset management agreement and an administrative services agreement with ING Investment Management, LLC ("IIM") under which IIM provides the Company with investment management and asset/liability management services. Total fees under the agreement were approximately $58,142,000 and $55,117,000 for the years ended December 31, 2004 and 2003, respectively. |
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Inter-insurer Services Agreement: The Company has entered into a services agreement with certain of its affiliated insurance companies in the United States ("affiliated insurers") whereby the affiliated insurers provide certain administrative, management, professional, advisory, consulting and other services to each other. Net amount paid under these agreements was $82,372,000 and $72,662,000 for the years ended December 31, 2004 and 2003, respectively. |
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Reciprocal Loan Agreement: The Company has entered into a reciprocal loan agreement with ING AIH to facilitate the handling of unusual and/or unanticipated short-term cash requirements. Under this agreement, which expires July 1, 2011, the Company and ING AIH can borrow up to $606,179,000 from one another. Interest on any of the Company's borrowings is charged at the rate of ING AIH cost of funds for the interest period plus 0.15%. Interest on any ING AIH borrowings is charged at a rate based on the prevailing interest rate of U.S. commercial paper available for purchase with a similar duration. Under this agreement, the Company incurred interest expense of $386,000 and interest income of $3,302,000 for the year ended December 31, 2004. At December 31, 2004, the Company had no amounts payable to ING AIH and $194,601,000 receivable from ING AIH. The receivable is recorded in cash and short-term investments on the accompanying balance sheets. |
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Tax Sharing Agreements: The Company has entered into federal tax sharing agreements with members of an affiliated group as defined in Section 1504 of the Internal Revenue Code of 1986, as amended. The agreement provides for the manner of calculation and the amounts/timing of the payments between the parties as well as other related matters in connection with the filing of consolidated federal income tax returns. The Company has also entered into a state tax sharing agreement with ING AIH and each of the specific subsidiaries that are parties to the agreement. The state tax agreement applies to situations in which ING AIH and all or some of the subsidiaries join in the filing of a state or local franchise, income tax or other tax return on a consolidated, combined or unitary basis. |
F-46 |
Security Life of Denver Insurance Company |
Notes to Financial Statements - Statutory Basis |
Service Agreement with ING Financial Advisors, LLC: The Company has entered into a services agreement with ING Financial Advisors, LLC to provide certain administrative, management, professional advisory, consulting and other services to the Company for the benefit of its customers. Charges for these services are to be determined in accordance with fair and reasonable standards with neither party realizing a profit nor incurring a loss as a result of the services provided to the Company. |
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Global Medium Term Note Program: In December 2002, the Company established a Global Medium Term Note program secured by funding agreements issued by the Company. The notes, which are offered by ING Security Life Institutional Funding, a special purpose statutory trust, are offered only to U.S. qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933 (the "Security Act") or to foreign buyers pursuant to Regulation S of the Securities Act. The program has issued notes with an aggregate outstanding principal balance of $2.3 billion as of December 31, 2004. |
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Assets and liabilities, along with related revenues and expenses recorded as a result of transactions and agreements with affiliates, may not be the same as those recorded if the Company was not a wholly-owned subsidiary of its parent. |
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18. |
Guaranty Fund Assessments |
Insurance companies are assessed the costs of funding the insolvencies of other insurance companies by the various state guaranty associations, generally based on the amount of premium companies collect in that state. |
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The Company accrues the cost of future guaranty fund assessments based on estimates of insurance company insolvencies provided by the National Organization of Life and Health Insurance Guaranty Associations and the amount of premiums written in each state. The Company has estimated this liability to be $4,388,000 and $2,643,000 as of December 31, 2004 and 2003, respectively, and has recorded a liability in accounts payable and accrued expenses on the balance sheets. The Company has also recorded an asset in other assets on the balance sheets of $3,882,000 and $619,000 as of December 31, 2004 and 2003, respectively, for future credits to premium taxes for assessments already paid. |
F-47 |
333-34404 |
April 2005 |
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